Washington - The Internal Revenue Service has announced a settlement initiative for executives and companies that participated in an abusive tax avoidance transaction involving the transfer of stock options or restricted stock to family-controlled entities.Under this scheme, executives, often facilitated by their corporate employers, transferred stock options to family-controlled partnerships and related entities typically created for the purpose of receiving the options and avoiding taxes on compensation income normally taxed to the executive. The tax objective was to defer for up to 30 years taxes on the compensation, and the plan resulted, in many cases, in the corporation deferring a legitimate deduction for the same compensation.
"These transactions raise questions not only about compliance with the tax laws, but also, in some instances, about corporate governance and auditor independence," said IRS Commissioner Mark W. Everson. "These deals were done for the personal benefit of executives, often at the expense of shareholders."
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