Google Sues IRS for $83.5 Million Tax Refund

Bloomberg is reporting that Google has 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 disclosed its intention to file a challenge to the IRS over a domestic tax issue, though not the substance, in a filing with the Securities and Exchange Commission on Jan. 29.