Compaq Computer Corporation & Subsidiaries v. Commissioner

EDITH H. JONES, Circuit Judge:

In this case, Compaq Computer Corporation engaged in a foreign stock transaction involving the purchase and resale of American Depository Receipts (ADRs). The Tax Court held that because the ADR transaction lacked economic substance, the transaction should be disregarded for federal income tax purposes. 113 T.C. 214, 1999 WL 735238 (1999). The Eighth Circuit recently decided the same question and concluded as a matter of law that ADR transactions of the sort at issue here have economic substance and a business purpose. We agree with the Eighth Circuit’s…