The tax case against Fairchild Industries and its chairman, Edward G. Uhl, snarled last week on a tangle of legal arguments which may result in the case being dismissed.
U.S. District Court Judge James R. Miller indicated he may issue an opinion this week on the arguments over the specific charges against the international aircraft company and Uhl. Miller's opinion will determine whether the case ever reaches the jury.
At this point, testimony in the trial has been postponed for another week so Miller can weigh the arguments before him. It is now scheduled to resume next Monday.
At issue is whether the corporation should have been indicted at all for alleged violations of tax laws. Fairchild and Uhl are charged with knowingly falsifying corporate tax returns for 1971 and 1972 by taking depreciation deductions for corporate cars.
U.S. Attorney Russell T. Baker says Fairchild is not entitled to the deductions because the cars were actually part of a scheme for the corporation to "launder its funds and to disguise the political contributions which it made," contributions which were illegal.
But Fairchild defense attorneys say they dug up papers from the Internal Revenue Service on Jan. 23 which say the IRS itself told the firm it could do what the government has said it shouldn't have done.
It was undisputed in the fourth week of the trial that corporate officers selected to have company cars reimbursed Fairchild for 63 percent of their cost. The depreciation deduction is based on the total cost of the cars.
The government said in oral arguments last week that Fairchild could claim depreciation based only on the 37 percent of the cost of the cars which it actually paid, since the rest was paid by the officers.
But defense attorneys based their arguments on the IRS papers, saying that in situations involving reimbursement of money, the IRS told the firm in 1976 to depreciate the entire cost and include the reimbursement as income.
In papers filed with the court prior to the trial, Uhl estimated that about $50,000 was generated for political contributions between 1964 or 1965 and 1972, when Fairchild disbanded its political fund. The government says that $80,000 was generated during the 10 years.
Uhl said in 1974 he took what money was remaining in the fund and gave it to charity.