Brocade says IRS is looking at Foundry’s tax returns for last two years

brocade-logoBrocade Communications dropped word into its quarterly 10-Q financial filing with the SEC today of an examination by the Internal Revenue Service of the  last two tax returns filed by Foundry Networks, whose sale to Brocade was finalized Dec. 18.

The examinations, covering both the 2007 and 2006 tax years, began earlier this month. “As the audit has just begun,” the company reported, it “is not aware of any proposed adjustments.” Nevertheless the company “believes its reserves are adequate to cover any potential assessments that may result from the examination.”

Brocade knows a bit about IRS audits. In May, the tax agency completed an examination of the company’s tax return for fiscal 2003 that it began in November 2005. The IRS questioned Brocade’s pricing for cost sharing and buy-in agreements with its foreign subsidiaries. The proposed “adjustment” included the use of about $306 million worth of Brocade’s previous tax losses and a payment of $6.4 million, which the company appealed the following month. Settlement is still pending, according to the company’s annual financial filing with the SEC.

 

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