The Internal Revenue Service has asked agency staff to scrutinize the tax returns of wealthy people who use a strategy known as a variable prepaid forward contract, The New York Times reported.
The IRS published on its website a technical paper about the use of variable prepaid forward contracts, which corporate executives use to turn their stock holdings into cash and defer tax payments on them for several years.
The IRS concludes that the transactions are true sales and thus taxable to the executive. A corporate tax consultant told the Times that the unpaid taxes associated with variable prepaid forward contracts probably total billions of dollars annually.
