Google Inc., owner of the most popular Internet search engine, sued the U.S. Internal Revenue Service for an $83.5 million refund claiming it was improperly denied a deduction for a 2004 stock transaction with America Online Inc.
The IRS erred in 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, according to the complaint in U.S. Tax Court.
“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 the complaint.
Google, based in Mountain View, California, issued the warrant for its “series D preferred stock” in June 2002 in recognition of AOL efforts to promote Google’s search engine among its users, according to the complaint.
AOL exercised the warrant in May 2004, about three and a half months before Google priced its initial public offering and its common stock began trading on the Nasdaq stock market, according to the suit.
Dean Patterson, an IRS spokesman, didn’t immediately reply to an e-mail seeking comment on the lawsuit.
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