The IRS's interest in the tax implications of backdated options is not new.
We are currently working with a number of clients that have already received Information Document Requests ("IDR") from the IRS requesting information relating to the backdating issue.
The consequence of a discounted stock option being subject to § 409A is that the option holder recognizes taxable income as the option vests (and thereafter), whether or not the option has been exercised (in other words, whether or not the option holder has actually obtained any value from the option).
On July 11 the IRS released an internal Industry Director Directive memorandum dated June 15, 2007 (the "Directive"), which designates transactions involving backdated stock options as a "Tier I Issue" for IRS agents.
Tier I Issues are considered matters of "high strategic importance," The Directive has important implications for both companies and individuals.
The Directive is significant, nonetheless, in that it signals a nationally coordinated effort within the IRS to target transactions involving backdated stock options, and also establishes mandatory audit requirements and centralized reporting procedures within the IRS as relating to backdated stock options.
As noted below, the directive also signals the IRS's intention to pursue the issue against individuals who received such options.
Designated as a Tier I Issue, IRS field agents are now required to audit all transactions involving backdated stock option grants and/or backdated exercise prices.
The Directive also expands the categories of options that trigger special attention to include any options that might be discounted, mis-priced, mis-dated, or in-the-money.
Like Jobs, she is said to be a tyrannical, if genius, business leader.
As the co-founder and former CEO of Martha Stewart Living Omnimedia As criminal securities-fraud cases go, prosecutors obviously felt they had a solid case in which they could prove intent, the toughest burden faced in criminal cases.
But as yet another executive who was once close to Jobs comes under the backdating cloud, one has to wonder: Is Jobs as innocent as Apple Inc. Or is the government afraid to go after one of the most respected leaders of American business? You can put him up there with Bill Gates and Warren Buffett," said Peter Henning, a professor who studies white-collar crime at Wayne State University in Detroit and one of the few legal scholars still paying attention to stock-options backdating.
"If you are going to put a case against him, you had better be sure it's a strong case." To be sure, regulators have in the past gone after celebrity business leaders.
Anderson settled his case, but Heinen is still on the hook and expects to go to trial sometime next year.