The Internal Revenue Service (IRS) lost a bid to collect close to $4 million from the estate of former Enron Corp. Chairman Kenneth Lay and his wife Linda. Kenneth Lay, 64, died of a heart attack in July 2006, six weeks after he was convicted on 10 fraud and conspiracy counts (see Daily GPI, July 6, 2006; May 26, 2006). The tax case dated to Sept. 21, 2001, when the Lays sold $10 million in annuities to Enron as part of an agreement for Kenneth Lay to retake the CEO position, which had been vacated by Jeffrey Skilling a month earlier. The agreement with Enron at the time stipulated that the annuities would be returned to Lay if he worked a 4.25-year term. However, Enron filed for bankruptcy protection less than three months later (see Daily GPI, June 21; May 3, 2006). The IRS contested the Lays’ contention in their 2006 tax filing that the annuities were sold to Enron for no monetary gain; in 2009 the IRS filed a notice of tax deficiency for $3.9 million. U.S. Tax Court Judge Joseph Goeke disagreed, ruling that the Lays’ transactions were legitimate and neither of the Lays nor the estate received any distributions or death benefit from the annuity.

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