The US tax authority, Internal Revenue Service, has been ordered to repay millions of dollars in taxes, fines and interest to a group of tax...

The US tax authority, Internal Revenue Service, has been ordered to repay millions of dollars in taxes, fines and interest to a group of taxpayers by a judge, after IRS officials were found to have effectively bribed witnesses to win a tax shelter case.

The case revolved around a scheme known as the Kersting tax shelter. This allowed airline pilots and their families to purchase stock in one of Kersting's companies. In exchange, the pilots received promissory notes, on which they would have to pay interest, but which allowed them to claim interest deductions on their tax returns.

The IRS had ruled that the use of Kersting tax shelters was illegal and pursued a number of investors who had used the scheme, many of whom came to a settlement with the authorities.

However, three witnesses were effectively bribed with cash, pre-paid expenses, tax settlements below par, and ten years of added tax benefits so that they would testify against six pilots, according to a representative of 100 of the 500 taxpayers who settled with the IRS.

The US Tax Court decided that all of the settled cases in the Kersting Tax Shelter program should receive 64 per cent of their monies back as a sanction, in a unique judgement against the IRS.

The wronged taxpayers will receive an estimated $56 million from the IRS in due course.