ii. Reasonable Factual Basis Impermissible Tactical Purposes Wells Fargo cites three cases to support the proposition that the United States must have a reasonable basis in fact to assert its "Second Additional Defense": Mahoney v. United States, 223 Ct. Cl. 713 (1980), Mo. Pac. R.R. Co. v. United States, 411 F.2d 327 (8th Cir. 1969), and Missouri, 338 F.2d 668. The United States contends that Fed.R.Civ.P. 8 is the only standard applicable at the pleading stage and Wells Fargo's cases concern the United States' burdens at trial or within the context of a motion for summary judgment, not at the pleading stage.

Certiorari was only sought with respect to the donated property issue and the Supreme Court's decision was limited accordingly.See also Missouri-Illinois R.R. v. United States, 381 F.2d 1001, 180 Ct.Cl. 1179 (1967); Missouri Pacific R.R. v. United States, 301 F. Supp. 839 (E.D.Mo. 1967), aff'd in part, rev'd in part and remanded, 411 F.2d 327 (8th Cir. 1969), cert. denied, 396 U.S. 1037, 90 S.Ct. 861, 24 L.Ed.2d 681 (1970). In relevant part, Section 901 provides:

The Internal Revenue Service held that plaintiff was entitled to a deduction from gross income for such tax but not a tax credit. The factual under-pinning of this issue is in all material respects identical to Missouri-Illinois R. R. v. United States, 180 Ct.Cl. 1179, 381 F.2d 1001 (1967), and Missouri Pacific R. R. v. United States, 301 F. Supp. 839 (E.D.Mo. 1967) aff'd in part, rev'd in part and remanded, 411 F.2d 327 (8th Cir. 1969), cert. denied, 396 U.S. 1037, 90 S.Ct. 681, 24 L.Ed.2d 681 (1970). In both cases, it was held that the taxpayer was entitled to the claimed tax credit.

Having reviewed Judge Boylan's order and the relevant case law, the Court finds nothing in the order to be contrary to law. Two of the cases cited by Wells Fargo — Missouri Pacific Railroad Co. v. United States, 168 Ct. Cl. 86 (1964) (" Missouri Pacific") and Missouri Pacific Railroad Co. v. United States, 411 F.2d 327 (8th Cir. 1969) (" Mo. Pac.") — concern the parties' respective burdens of proof, not the standards to be met at the pleading stage. The government does not have to prove its defense before it can even plead it.

Finally, with respect the Government's 26 U.S.C. § 2035(b) argument, (see below), plaintiffs argue that the Government bears the burden to show a reasonable basis for the setoff. See Missouri Pac. R.R. Co. v. United States, 411 F.2d 327, 329 (8th Cir. 1969). See also Pl. Response at4.II.

Should the United States prove that a reasonable basis exists for the offset, the burden shifts to the plaintiff to establish that it was entitled to treat the items as discounts in the nature of interest. Missouri Pacific Railroad Co. v. United States, 338 F.2d 668, 168 Ct.Cl. 86 (1964); Missouri Pacific Railroad Co. v. United States, 411 F.2d 327 (8th Cir. 1969). 22.

Respondent relies on section 4.901-2(f)(3), Temporary Income Tax Regs., for this position. Petitioner argues that this regulation is invalid and requests that we follow what have been termed the ‘Mexican railroad car rental‘ cases, e.g., Missouri Pacific R.R. Co. v. United States, 497 F.2d 1386 (Ct.Cl. 1974); Chicago Burlington & Quincy Railroad Co. v. United States, 455 F.2d 993 (Ct.Cl. 1972), reversed on other grounds 412 U.S. 401 (1973); Missouri Pacific R.R. Co. v. United States, 301 F.Supp. 839 (E.D. Mo. 1967), affd. in part and reversed in part on other grounds 411 F.2d 327 (8th Cir. 1969); Missouri-Illinois R.R. Co. v. United States, 381 F.2d 1001 (Ct.Cl. 1967). We agree with respondent.