Fictitious Tax Credit

A company purchased mutual fund shares from a bank under conditions which led the tax administration to consider the tax credit related to such shares to be fictitious. After having paid the tax reassessment which was grounded, according to the tax administration, on the concept of abuse of law, the company sued the bank for breach of its duty to supply adequate information. The Paris Court of Appeals, in a decision dated 30 January 1996, rejected the company's claim. The Court stated that because the company's corporate object -as defined in its organizational documents- included, among other things, the realization of financial transactions relating to securities, it could not be unaware of the risk attached to such transactions.