California OTA Affirms Tax Penalties on S-Corp ESOP as “Abusive Tax Avoidant Arrangement”

On November 4, 2025, the California Office of Tax Appeals (“OTA”) issued a nonprecedential decision in a dispute between appellants A. Varela and J. Varela and respondent Franchise Tax Board (“FTB”), regarding the tax treatment of Mud Management, Inc. (“Mud”).

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