The Internal Revenue Service is pursuing billionaire Philip Anschutz over $143.6 million in back taxes in an effort to discourage arrangements that allow people to defer paying capital gains taxes.
The taxes involve transactions that Anschutz entered into with shares he owned in Union Pacific railroad and Anadarko Petroleum, according to The Wall Street Journal. The transactions in 2000 and 2001 earned him approximately $429 million in cash and a share of future increases in the share price.
Under the agreement, the shares will be turned over to an investment bank at a future date, but in the meantime Anschutz lent the bank an equivalent amount of stock in exchange for cash. Anschutz claimed that the transactions were never completed and that he does not owe the back taxes. He sued the IRS after it sent him notices of his tax debt.
In 2003, the IRS issued guidance saying such arrangements, known as prepaid forward contracts, did not immediately trigger taxes, and they became a popular way for investors to defer paying capital gains taxes. The IRS began cracking down on the arrangements in 2006, and they have since declined in use.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access