http://online.wsj.com/article/SB121297088214955885.html?mod=googlenews_wsjBy JESSE DRUCKER
June 9, 2008; Page A1
The Internal Revenue Service is fighting with billionaire Philip Anschutz to force the Denver-based mogul to pay back taxes totaling $143.6 million. The court battle is part of a broad attempt by tax authorities to crack down on complex transactions used to defer paying capital-gains taxes.
The imbroglio stems from transactions that Mr. Anschutz entered into involving shares he owned in Union Pacific Corp. and Anadarko Petroleum Corp. in 2000 and 2001. The deals netted him cash, as well as a share of any future rise in the stock price, with a total value of roughly $429 million. The arrangement is also set up to protect him against losses if the stock price falls.
He contends the deals technically weren't completed sales for tax purposes, and thus didn't trigger tax obligations, according to filings in U.S. Tax Court in Washington. As a result he hasn't paid capital-gains taxes on the transactions.
Mr. Anschutz -- an oil, railroad and media investor identified as the 41st-richest man in the U.S. by Forbes -- isn't the only person to use such an arrangement. Executives at companies including Starbucks Corp., Costco Wholesale Corp., Tyson Foods Inc., IAC/InterActive Corp., Cablevision Systems Corp. and Apollo Group Inc. have all used similar "variable prepaid forward contracts" to cash in shares in these companies and related entities, according to securities filings.
The tax treatment of these executives' arrangements isn't public, so it isn't clear whether the transactions involved deferral of taxes of the type the IRS is targeting. Experts say tax deferral is a typical component of such arrangements.
The companies either didn't respond to requests for comment or declined to comment.
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