04/24/2009 05:12 am ET Updated May 25, 2011

IRS: AIG Taxes Probed

(Reuters) -- The U.S. Internal Revenue Service is challenging some of the tax deals structured by AIG Financial Products Corp, the unit of the giant insurer that has caused political outrage over $165 million in employee bonuses, the Wall Street Journal said.

Some banks that received government-funded payouts to settle contracts with American International Group (AIG.N) turned to the insurer for help cutting their income taxes in the U.S. and Europe, the paper said, citing court records and people familiar with the business. The company paid $61 million last year in disputed taxes stemming from the deals, but sued the U.S. government last month in federal court in New York, seeking a refund, the paper said, citing filings in the case.