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SOMETIMES TAX GUYS REALLY PAY THEIR WAY

August 30, 2005

Attorneys from Fenwick & West LLP prevailed today in a $100 million Tax Court case. The Fenwick group, including Kenneth B. Clark, successfully defended Xilinx, Inc. in its allocation of employee stock option (ESO) costs with a foreign subsidiary under an R&D cost-sharing agreement.

The court found the IRS arguments wanting:

Simply put, the regulations applicable to the years in issue did not authorize respondent to require taxpayers to share the spread or the grant date value relating to ESOs. Petitioners are merely required to be compliant, not prescient.

The taxpayer victory also prevented the IRS from making $20 million in penalties stick.

Cite: Xilinx, Inc. and Subsidiaries v. Commissioner, 125 T.C. No. 4.

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