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Companies, executives ordered to pay up

Wednesday, Feb. 23, 2005 | 9:26 a.m.

MINNEAPOLIS, Minn. -- The Internal Revenue Service has told lawyers representing 42 publicly held companies and nearly 200 executives to come forward and pay taxes and interest on $700 million in gains from an illegal tax dodge by May 15 or face stiffer penalties and suits that would disclose the identities of the so-far-anonymous offenders.

According to the IRS, the offending executives, often aided by corporate lawyers and public accountants, transferred stock options between 1997 to 2001 to family-controlled partnerships or related entities. They were created for the sole purpose of avoiding the payment of federal taxes on gains that would result when the executives exercised the options -- or bought option shares -- after the company's stock had appreciated.

The purpose was to defer the taxes owed for up to 30 years, even though the executives had unlimited access to the money in the trusts after the stock was sold.

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