Academic journal article Journal of Accountancy

Ninth Circuit Reverses Itself in Xilinx

Academic journal article Journal of Accountancy

Ninth Circuit Reverses Itself in Xilinx

Article excerpt

The Ninth Circuit Court of Appeals affirmed the Tax Court's holding that allowed a semiconductor company to deduct costs of employee stock options (ESOs) without having to share them with its Irish subsidiary in a joint venture (Xilinx v. U.S., docket nos. 06-74246 and 06-74269, 3/22/2010). Thus the Ninth Circuit overruled its own holding last year that had reversed the Tax Court (5/27/2009, withdrawn). For Tax Matters coverage of the earlier appellate decision, see "Related Parties Must Share Employee Stock Options Costs," Oct. 09, page 69).

Xilinx and the subsidiary, Xilinx Ireland, entered a cost-sharing agreement for developing new technology that did not specifically address ESOs. Xilinx's business expense deductions for tax years 1997 through 1999 included a total of $177 million in costs of employee exercises of options. It also claimed related research and development credits totaling $84 million. The IRS issued a deficiency, claiming the costs should have been shared with Xilinx Ireland. Xilinx cited Treas. Reg. [section] 1. …

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