The US Internal Revenue Service is pursuing billionaire oil and media tycoon
Philip Anschutz over $143.6m (£73.4m) in back taxes in a bid to discourage
arrangements allowing deferral of capital gains taxes.
The taxes involve transactions Anschutz entered into with shares he owned in
Union Pacific railroad and Anadarko Petroleum, according to
Wall Street Journal. The transactions in 2000 and 2001 earned him $429m
(£219m) in cash and a share of future increases in the share price but meant he
didn’t have to pay the 15% capital gains tax.
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.
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