Report: IRS Looking at Mongomery Ward Chief’s Stock Purchase
CHICAGO (AP) _ The Internal Revenue Service is sparring with Montgomery Ward & Co. chief Bernard Brennan and other shareholders over company shares purchased during the $3.8 billion leveraged buyout of the retailer in 1988, according to a published report today.
The IRS argues that the $1 per share that Brennan paid for 2.9 million shares falls short of the $83 a share it was worth, The Wall Street Journal reported today. The government is seeking to treat the difference as income and has asked the company chairman to pay taxes of $67.6 million on that amount, the newspaper said.
The IRS also has made similar moves against 45 other investors and executives of Wards who purchased stock during the buyout.
Brennan’s attorney, Stuart Seigel, said Brennan paid a fair amount for the shares.
″We’re not sure where the IRS got those numbers from,″ Seigel said.
Brennan was out of the office today, his secretary said. ″We have no comment beyond what is in the article,″ company spokeswoman Ann Raives said.
In a petition to the U.S. Tax court contesting the government’s move, Brennan calls the IRS claims ″arbitrary and capricious,″ the Journal reported.
Experts said that the IRS commonly contends that privately placed shares are worth more than their declared value and that it generally resolves those disputes without going to trial.