INTERSPORT FASHIONS WEST, INC. v. United States, 1:07-cv-00739

Intersport Fashions West, Inc. seeks a tax refund for the 2002 tax year related to deductions allegedly arising from Eurobike’s 2003 restructuring expenses.
Eurobike funded and mentored Intersport through 1999–2003; Eurobike’s debt and restructuring involved significant consulting and related costs.
Intersport’s 2002 return claimed a $1,621,273 deduction (allocable to Eurobike’s restructuring) that would net a $583,354 refund; the 2001 deduction had been $526,648 (capitalized as a management fee).
IRS audited Intersport in February 2005 for 2001–2003; amended 2001 and 2002 returns were filed after the audit, while 2003 was not amended.
The IRS disallowed the amended 2001 and 2002 deductions under 26 C.F.R. § 1.482-1(a)(3); the court has Tucker Act jurisdiction and earlier stayed proceedings due to Fairchild bankruptcy proceedings.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the 2002 amended return deductions are barred by 1.482-1(a)(3).	Intersport argues the 2002 deduction falls within a timely-filed original return as a correction of calculation.	U.S. contends amended/untimely returns cannot be used to claim allocations under 1.482-1(a)(3).	Yes, barred by 1.482-1(a)(3).
Whether Scaife/Lerner preclude treating the 2002 amendment as timely due to filing after the due date.	Intersport maintains amendments can cure original filing mistakes.	Scaife and Lerner require filing before or at the original due date; amendments after the due date are untimely.	Barred; amendment filed after due date cannot be used to decrease taxable income.
Whether the doctrine of substantial compliance allows the deduction despite untimely filing.	Intersport asserts substantial compliance because it reported the allocation and corrected a mistake.	Federal Circuit narrowly rejects substantial compliance as a basis to override explicit regulatory timing.	Not applicable; doctrine does not override explicit regulatory timing.
Whether the purpose of § 482 supports allowing the deduction despite timing rules.	Section 482 aims to parity with uncontrolled taxpayers and prevent tax avoidance.	Each tax year stands as a separate claim; denial aligns with regulatory framework and discretion.	No; purpose does not override the regulatory prohibition on untimely/amended returns.

Scaife Co. v. Comm'r, 314 U.S. 459 (U.S. 1941) (untimely amended returns cannot decrease taxable income)
Lerner Stores Corp. v. Helvering, 314 U.S. 463 (U.S. 1941) (amended returns after due date cannot cure computation errors)
Scaife Co. v. Comm'r (Scaife), 314 U.S. 459 (U.S. 1941) (timing rules for first return control amendment outcomes)
Morton-Norwich Prods., Inc. v. United States, 221 Ct. Cl. 83, 602 F.2d 270 (Ct. Cl. 1979) (IRS discretion under §482; reporting true taxable income)
Credit Life Ins. Co. v. United States, 948 F.2d 726 (Fed. Cir. 1991) (doctrine of substantial compliance interpreted narrowly)