IRS practice unit, cost-sharing arrangements with stock-based compensation

IRS practice unit, cost-sharing arrangements

The IRS Large Business and International (LB&I) division publicly released a “practice unit”—part of a series of IRS examiner “job aides” and training materials intended to describe for IRS agents leading practices about tax concepts in general and specific types of transactions—concerning cost-sharing arrangements with stock-based compensation.


Read the IRS practice unit: Cost-sharing arrangements with stock-based compensation [PDF 227 KB] (last updated in September 2020)

KPMG observation

Tax professionals view the new practice unit as a strong signal that the IRS is planning to aggressively audit the inclusion of stock-based compensation in cost-sharing arrangements (CSA) in the wake of the IRS victory in the Ninth Circuit’s decision in Altera Corp. v. Commissioner (2019). Read TaxNewsFlash

The practice unit specifically cites Altera as a key legal authority and points examiners to the various indicators on the tax return that would demonstrate that a taxpayer has a CSA that should be investigated.

© 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

For more detail about the structure of the KPMG global organization please visit

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us