The US IRS has moved to block an attempt by IBM to shelter itself from paying taxes on profits.

IBM has admitted using a tax shelter to avoid paying $1.6 billion in income taxes.

Big Blue was using a foreign subsidiary to buy back shares through foreign exchanges. The subsidiary then used the shares to pay its corporate parent in America for goods and services.

The IRS declared that the technique could not be used to eliminate taxes. The notice said it would disallow any transactions beginning on that day.

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