) will set aside $281 million as a charge in the first quarter of
2013 to increase its reserves. The need arises from the
continuing tax liability dispute with the Internal Revenue
The decision to set aside the amount stems from the ruling
The Bank of New York Mellon Corporation
) by a tax court judge in the high-profile case filed by IRS.
Owing to this adverse ruling, BNY Mellon incurred a loss of $850
IRS had filed the lawsuit against several banks including
BB&T, BNY Mellon and
Wells Fargo & Company
), accusing these firms of creating bogus foreign tax credits
through loans from London-based financial institution. The case
against BNY Mellon was the first one to go for the trial.
At present, BB&T is engaged in a legal battle with IRS to
recover tax assessment worth $892 million. The IRS had sent
BB&T a legal notice of deficiency for 2002-2007 for a
liability for taxes, penalties and interest connected to the
disallowance of foreign tax credits and other deductions claimed
in correlation with the financing transaction.
BB&T paid the assessment in 2010 and then filed a court case,
seeking a refund in the U.S. Court of Federal Claims. This trial
is expected to commence on Mar 4. BB&T recorded a receivable
for the payment, excluding the reserves.
BB&T is confident of a favorable ruling as it is going to
bring up arguments and issues that were not taken up by the Tax
court. However, the creation of provision is a precautionary
It is likely that BB&T will increase or decrease its reserves
by nearly $496 million or $328 million, respectively, as the
lawsuit proceeds further.
Currently, BB&T carries a Zacks Rank #3 (Hold). Other stock
in the same sector that is performing well and is worth
). It carries Zacks Rank #1 (Strong Buy).
BB&T CORP (BBT): Free Stock Analysis
BANK OF NY MELL (BK): Free Stock Analysis
BANKUNITED INC (BKU): Free Stock Analysis
WELLS FARGO-NEW (WFC): Free Stock Analysis
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