Billionaire Anschutz Loses Capital Gains Ruling Over $144 Million Tax Bill

Denver billionaire Philip Anschutz lost a fight with the Internal Revenue Service over a $143.8 million tax bill for himself and his company for 2000 and 2001.

The U.S. Tax Court in Washington today found that Anschutz Co. was required to recognize built-in gains upon entering into an agreement to sell shares to an investment bank, while also lending the same shares to the bank.

Anschutz filed a petition after the IRS challenged his use of 13 transactions that he claimed deferred capital gains taxes related to his company’s merger of Union Pacific Corp. and Anadarko Petroleum Corp. in 2000.

The transactions being challenged occurred from May 2000 to April 2001.

The case tested a 2003 IRS ruling that pledging shares as collateral for a so-called variable prepaid forward contract doesn’t amount to a sale of assets for tax purposes.

A prepaid forward contract gives an investor an upfront payment in exchange for delivery of an asset in the future. The contracts have grown in popularity among corporate executives looking to lock in stock gains while delaying tax.

Robert Rudnick, an attorney for Anschutz, didn’t immediately return a call seeking comment.

To contact the reporter on this story: William McQuillen in Washington at bmcquillen@bloomberg.net.

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