Cyan Challenges Irs Tax Claim

Cyan Inc., the Spokane-based creators of computer games Myst and Riven, is challenging an Internal Revenue Service claim that the company owes the government $2 million in additional taxes.

In September, the IRS issued a notice of deficiency saying Cyan’s taxable gross income for 1994 was $716,000, rather than the $90,000 that the company reported. The notice also said the company’s taxable income for 1995 was $5.42 million, rather than the $338,000 reported.

The IRS says Cyan should have paid $206,000 in taxes in 1994, and $1.85 million in 1995. U.S. Tax Court documents show Cyan paid about $15,000 in taxes in 1994 and $79,000 in 1995.

But Cyan filed a petition Dec. 15 asking the court to deny the IRS’s claims. Cyan’s petition says the IRS made errors in calculating the company’s taxable royalty income, deductions for compensation paid and expenses, and a credit claimed for research.

The IRS has 60 days to respond to Cyan’s petition. The parties have the option of negotiating a settlement, or taking the case to trial before a tax court judge.

Cyan officials said earlier this week that it would be inappropriate to comment on the case at this point.

Cyan’s Myst, released in 1995, has become the top-selling CD-ROM computer game of all time. Sales for Riven, the Myst sequel, have also been strong since its long-awaited release last fall.

, DataTimes