Court rules Wells Fargo subject to penalty on foreign tax credits

By Ken Sweet Financials Associated Press

FILE PHOTO - A Wells Fargo branch is seen in the Chicago suburb of Evanston, Illinois, U.S. on February 10, 2015. REUTERS/Jim Young/File Photo (Copyright Reuters 2017)

NEW YORK (AP) — A federal court has ruled that Wells Fargo is liable for a negligence penalty in a tax case that involved foreign tax credits, but the bank prevailed in another part of the case that could mute any payment.

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The case involves Structured Trust Advantaged Repackaged Securities, or STARS.

Wells Fargo said the structure exempted it from tax, which the IRS disputed. A jury ruled last year that Wells Fargo's STARS were two products, a loan and trust. The trust was ruled to be simply for tax purposes, while the loan was not.

A court found Wells liable for a 20 percent penalty Wednesday tied to tax credits, but also that it could deduct interest expenses from the loan.

Wells Fargo says it's reviewing the ruling and determining its next steps.