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Google Wants its Money: Sues IRS Over $83.5M Tax Refund

By - Source: Bloomberg | B 19 comments

Google wants its $83.5 million USD.

Bloomberg reports that Google has sued the IRS for an $83.5 million refund. The company said it was improperly denied a deduction for a 2004 stock transaction with America Online. Google hinted to the current lawsuit back in late January in an SEC filing, saying that it had "one issue which we plan to litigate in court" regarding the IRS.

"Google’s actual cost for issuing the AOL warrant was $238,667,835, which equaled the spread between the $21,642,985 it received from AOL to exercise the AOL warrant and $260 million in value [of the stock]," Google said in a formal complaint.

The tax refund Google claims the IRS owes is a mere chump of change in the bigger picture. Google reportedly generates around $83.5 million USD every 20 hours, a number based on the company's Q2 sales a year ago. Still, money owed is money owed, even if it's a dollar – the IRS would definitely be knocking on Google's door if it were the other way around.

According to Google's complaint in U.S. Tax Court, the IRS made an error by disallowing a $238.6 million deduction claimed for "the difference between the price AOL paid to exercise a warrant for Google stock, and the value of the shares." Google reportedly issued the warrant for its "series D preferred stock" back in June 2002 as a recognition of AOL's efforts to provide multiple services to Google including "quality control" and sponsored links enhancement.

Bloomberg goes on to report that AOL exercised the warrant in May 2004, but that was 3 1/2 months before Google priced its IPO, and its common stock began trading on Nasdaq. But it seems that Time Warner Inc., AOL's parent company, was affected by the same IRS problem Google is currently suing over, only the IRS claims that Time Warner owes the government $4.6 million USD. Time Warner filed its complaint on May 6.

And the tax drama goes on… what a mess. The full report can be read over on Bloomberg here. The case is 014061-13 in the U.S. Tax Court in Washington, D.C.

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  • 0 Hide
    jossrik , June 29, 2013 6:27 PM
    Stick it to 'em Google! Then reduce prices .001% across the board!
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    asukafan2001 , June 29, 2013 6:52 PM
    you do realize by "sticking it to em' " as you put jossrik, you will be paying for that refund.
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    itchyisvegeta , June 29, 2013 7:32 PM
    "the IRS would definitely be knocking on Google's door if it were the other way around."

    No they wouldn't. That was back in 2004. Unless the IRS knocked on Google's door within 7 years, the IRS can't audit anyone or any company past that. Google may not have a case, cause they waited too long, but that is for the judge to decide.

    I personally hope Google sticks it to them.
  • Display all 19 comments.
  • 0 Hide
    popatim , June 29, 2013 7:42 PM
    Warren buffett owes over a billion in back taxes and no one knocks on his door... you think they're goingto knock on googles? Get real...
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    crABtoad , June 29, 2013 8:17 PM
    I feel like this is a bribe related to the PRISM project. They can get legal money for not saying anything by "suing" the US Government. Maybe this is a paranoid thought, but I don't think it sounds really far-fetched either. They were just in front of senate and didn't indicate they were due anything more than what they had paid. In fact, they advocated for changing tax laws if the US wanted *them* to pay more.
  • 0 Hide
    x2ruff4u , June 29, 2013 8:39 PM
    Google does ALOT more than the IRS does for us.
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    chicofehr , June 29, 2013 10:12 PM
    With the IRS scandel and and its role in Obamacare, becoming a tax lawyer is the next big thing after becoming a patent lawyer. I wish I wasn't so lazy to study or I might try that path.
  • 0 Hide
    wildkitten , June 29, 2013 11:03 PM
    @asukafan2001
    No, it is no Jossrik or anyone else paying it. It was Google's money to begin with, if the court rules in their favor. If you owe10k a year in taxes and had 12k in withholdings, do you think that other people are paying your 2k refund? If you do, you don't understand the system.

    @itchyisvegeta
    That depends on how long Google has been working to get the refund. Usually a lawsuit is the last step, not the first. For all we know, they have been working since the beginning to get the refund.
  • 0 Hide
    gsxrme , June 30, 2013 6:26 AM
    Microsoft wa? Apple who? Google you are the future! Google does everything!
  • 0 Hide
    the1kingbob , June 30, 2013 7:12 AM
    What an amazing display of not understanding the tax system..... Even got a conspiracy theory in there. When is the voting system going to start working again so we can vote down this incompetence?
  • 0 Hide
    cscott_it , June 30, 2013 8:40 AM
    I don't believe there is a statute of limitations for the IRS (which I think is a silly thing). I believe they can get you at any point in time for back taxes.
  • 0 Hide
    jaquith , June 30, 2013 9:12 AM
    Tax system is broken and Google is a thief.

    Folks love free Google stuff to them it's like crack, but in reality those who are the 'clients,' you're the product,' we are robbed by Google so you in turn you have your free stuff, but in reality we charge the costs back to you -- so it's not free. Large companies donate (bribe) our legislatures to twist the tax laws in their favor and then bitch about it when the laws aren't fully in their fringe favors.
  • 0 Hide
    funguseater , June 30, 2013 1:10 PM
    LOL tax refund to Google, who keep all their funds offshore to avoid taxes, what a gong show.
  • 0 Hide
    wildkitten , June 30, 2013 1:41 PM
    @funguseater
    No, they do not keep all their funds offshore. They keep what money they make outside of the US offshore from the US so they don't pay double taxes, where they made the money and in the US. By the way, that is perfectly legal. They also pay taxes on that money to the places they make that money according to the tax laws of where the money was made.

    People tend to forget the US exists because we fought a war against unfair taxation. todays US government is worse than what the British were when the founders had the revolution.

    It's a sad day when we complain that people are only paying what they are supposed to pay legally and get angry when they go after refunds due them. Reminds me of the stupid show a few weeks ago when Apple was brought before congress to answer why they only paid the taxes they are legally obligated to pay and didn't pay more. The stupidity we are getting to is truly mind boggling.
  • -1 Hide
    icemunk , June 30, 2013 3:40 PM
    If I were the IRS, I would hire $64 million worth of auditors and audit the crap outta google.
  • 0 Hide
    wildkitten , June 30, 2013 4:36 PM
    @icemunk
    Yes, because a vindictive IRS that goes after people who try to resolve IRS mistakes is really what people want, and what people want the IRS to waste our money on.
  • 0 Hide
    cats_Paw , June 30, 2013 11:46 PM
    80+ million each 20 hours.... can i get a job there? :D .
  • 0 Hide
    Philip Stubbs , July 6, 2013 7:19 AM
    so let me get this straight... If I buy stock for 25k, but later realize that I over paid, I can deduct the difference, add stock brokerage & accounting expenses, and use the total as a deduction from taxable income?...

    The IRS is right to reject this claim. Had Google turned around and sold the stock, and reported the net loss, the IRS would not have rejected the claim.

    You simply can not use "over spending" as a means to lower your taxable income.
  • 0 Hide
    Art Faucett , July 7, 2013 10:10 PM
    LOL, the same libs that say pay your fair share when it comes to my money,. but when it's theirs, :"show me da money".
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