Corey Rosen
Tax Case Over ESOP and Synthetic Equity Rollover Must Go to Court
In Couturier v. Comm’r of Internal Revenue, No. 19714-16, (U.S.T.C. Jan. 22, 2024), a tax court ruled that a case must go to trial over a dispute over whether Claire Couturier made an excess contribution of $25,132,892 of the $26 million paid to an individual retirement account (IRA) during 2004–2005. Couturier filed for summary judgment, contending that there was no “excess contribution” because the property for which the $26 million was allegedly paid was from his ESOP. Couturier had owned 4,586 shares of stock through Noll Corporation’s ESOP. He also had stock options for at least 80,000 shares, participated in another incentive plan through which he held at least 500 more shares, plus “tax bonus units,” and through a deferred compensation plan, was entitled on retirement to monthly payments of $30,000 as of 2004. He was bought out for $256 million for all these accounts and rolled them into an IRA. The IRS failed to challenge his tax return for income tax deficiencies before the statute of limitations expired. However, in 2016, the IRS issued a notice that claimed Couturier was liable for roughly $8.5 million in excise taxes because the 4,586 shares of stock that could legitimately be rolled over to his IRA had been worth only $830,392, and the vast majority of the $26 million was a buyout of the three incentive and compensation plans noted above, none of which were qualified plans eligible for nontaxable IRA rollovers. The case has moved in and out of court since its filing. The ESOP transaction was also the subject of litigation and was ultimately settled in Solis v. Couturier (Civ. 2:08-cv-02732-RRB-GGH, E.D. Ca., filed Mar. 10, 2010).
