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U.S. Shuts Down Tax Shelter WASHINGTON, July 2, 2003 (Associated Press) The Treasury Department moved Tuesday to shut down a tax shelter marketed to corporate executives as a method to delay paying taxes when they exercise stock options. Under the new rules released by the Treasury Department and the Internal Revenue Service, anyone who used the tax arrangement in the past must disclose it on the next tax return.
The shelter, sold by accounting firms to executives and employees with stock options, tells the executive to sell the stock options to a family member or family partnership in return for a note promising repayment in as much as 30 years. According to the IRS, firms tht promoted the arrangement said executives do not have to pay taxes until receiving payments on the note.
The IRS will challenge the claim that the sale is made at "arm's length" -- a legal term describing a sale between two independent parties. The IRS said the transactions "rarely, if ever, reflect terms that would be agreed to between unrelated parties dealing at arm's length."
2003 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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