Judge Rules Against Wal-Mart in Tax-Shelter Case

New York City A North Carolina state judge ruled against Wal-Mart Stores Inc. in a tax-shelter case where the retailer paid itself rent and later counted that amount as a tax deduction.

Wal-Mart had transferred ownership of its stores to various in-house real-estate investment trusts (REITS), and then cut its tax obligation by taking deductions for rent payments that never left the company.

In a judgment signed on Dec. 31, Emergency Special Judge of Superior Court Clarence Horton Jr. ruled "there is no evidence that the rent transaction, taken as a whole, has any real economic substance," other than for cutting Wal-Mart's taxes.

The judge dismissed the retailer's suit, where it sought a refund of the $33.5 million in taxes, interest and penalties it paid the state after authorities determined it underpaid by that amount.

Wal-Mart said it hasn't decided on how it will proceed in the aftermath of the ruling, and declined to comment on the case's specifics due to a possible appeal.