Merck - Project Ryland/BermudaTriangle might cost them $2.3 billion

Poor Merck. They're already facing thousands of lawsuits related to its withdrawn Vioxx painkiller.

Now they may have to pay as much as $2.32 billion to the Internal Revenue Service in connection with disputed expenses on its tax returns.

The IRS has sent notices that it won't allow royalty-related expenses Merck claimed on its tax returns from 1993 through 1999, the Whitehouse Station, New Jersey-based drugmaker said in a Securities and Exchange Commission filing.

The Wall Street Journal reported yesterday that the IRS is contesting an arrangement by which Merck cut its U.S. tax bill by $1.5 billion over 10 years by paying a Bermuda-based unit to use its own patents.

This is the now famous Project Ryland, apparently named after a local Whitehouse Station Inn, possibly where the scheme was initally "cooked up", perhaps?.

Many of the strategies like the ones used by Merck were inspired by one man.

In 1988, longtime tax attorney and New York University law school professor R. Donald Turlington published an influential article in the proceedings of a tax conference.

Subtitled "The Art of Tax Avoidance," the article began with a 1931 quote from the late Chicago Mafia boss Al Capone: "A good lawyer with a briefcase can steal more than ten men with machine guns."

Much more here at Bloomberg.