The US Internal Revenue Service on Tuesday unveiled 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 tax sheltering arrangement, executives, often facilitated by their corporate employers, transferred stock options to family controlled partnerships and other related entities typically created for the sole purpose of receiving the options and avoiding taxes on compensation income normally taxed to the executive. The tax objective was to defer taxes on the compensation for up to 30 years and, in many cases, resulted in the corporation deferring a legitimate deduction for the same compensation.
Such schemes were aggressively marketed by professional service firms and financial institutions during the late 1990s and early 2000s, according to the IRS.
The US tax authority revealed that to date, it has identified 42 corporations, many more executives and unreported income of more than $700 million involved in such arrangements.
Executives who engaged in these transactions will have until May 23, 2005, to accept an IRS settlement offer to resolve their tax issues, and the offer is also being extended to corporations that issued the options to executives and directors as part of their compensation. Although the firms in question will not face any penalties, the IRS will recommend that the company's use of the shelter be examined by its board of directors' audit committee.
“These transactions raise questions not only about compliance with the tax laws, but also, in some instances, about corporate governance and auditor independence,” observed IRS Commissioner Mark W. Everson, continuing:
"We believe a new climate under Sarbanes-Oxley, together with the tougher independence standards for auditors recently proposed by the Public Company Accounting Oversight Board make this sort of thing less likely going forward. However, we want to give executives and corporations a chance to clean up past transactions.”
A comprehensive report in our Intelligence Report series examining tax-sheltering arrangements for investors is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report5.asp
Network Tweets
Network BlogsContent
provided by
|
Archive | Resources | Partners | Site Map | Links | Newsletter Archive | Contact | RSS Feeds | About | Syndication | Advertising & Marketing | Recruitment | Terms & Conditions | Privacy & Cookies
Copyright © 2012 - All Rights Reserved - Tax-News.com
IMPORTANT NOTICE: Tax-News.com has taken reasonable care in sourcing and presenting the information contained on this site, but accepts no responsibility for any financial or other loss or damage that may result from its use. In particular, users of the site are advised to take appropriate professional advice before committing themselves to involvement in offshore jurisdictions, offshore trusts or offshore investments.
Write a comment