) 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
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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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).