IRS Says Red McCombs Owes Back Taxes On Clear Channel Stock Transaction
July 28, 2010 at 4:24 AM (PT)
While CLEAR CHANNEL co-founder BILLY JOE "RED" MCCOMBS was announcing that he would be the lead investor in the attempt to bring Formula One racing and the U.S. GRAND PRIX to AUSTIN with the construction of a new racetrack, FORBES was reporting that the IRS had filed suit against MCCOMBS for $45 million in back 2002 and 2003 taxes based on the agency's contention that he should have reported $216.7 million in capital gains from the sale of 11.3 million shares of CLEAR CHANNEL.
The case arose from MCCOMBS' use of a gambit to defer capital gains tax that the IRS disallowed in a separate case against billionaire PHILIP ANSCHUTZ.
MCCOMBS borrowed $300 million to buy the MINNESOTA VIKINGS in the late 1990s, pledging CLEAR CHANNEL stock as collateral, then used a variable prepaid forward contract when the stock value declined and he wanted to hold the stock until it recovered, taking a cash upfront payment for an agreement to deliver the shares in the future. The IRS concluded that the transactions with three investment banks were actually sales and therefore immediately taxable.