IRS Wins $388 Million in Tax Court (Forbes Article)

July 3, 2015 - Posted by: admin - In category:

taxes - No Responses

The IRS recently won a $388 million settlement from the estate of Detroit Pistons owner Bill Davidson.

While this may seem to be yet another case of the ultra wealthy not paying “their share” of taxes during life and then being required to contribute a larger share after their death, there are also several valuable lessons to be learned from this case. First, this is not one of those situations where a wealthy individual neglected to engage in estate or financial planning (although we see that all too often). Rather, Mr. Davidson had retained professionals to design a rather elaborate estate and financial plan, utilizing a variety of tools, some of them tried and tested and some not so much. Perhaps the advisors of Mr. Davidson pushed the envelope somewhat with regard to his planning and that might have opened the door for the IRS to come back later and challenge some of the planning and other business management tools that were used by him and by his advisors.

It should also be noted that the IRS was actually seeking more than $2 billion (yes, that is 2 billion) in various taxes, so in many respects, the final settlement of $388 million might seem like a significant victory for the Davidson estate. On the other hand, it is difficult to consider paying the IRS $388 million in taxes as a victory in any sense of that word…:) But this case also brings to light the larger estate tax issue once again. There are some in Washington who continue to believe that the wealthy such as Mr. Davidson should be paying much more of their wealth in the form of various taxes, both during life and at death. For example, presidential hopeful and Vermont Senator Bernie Sanders has proposed legislation that would increase the estate tax rate on billionaires from the current 40% to 65%. On the other side of the spectrum, there many others in Congress who are seeking to repeal the federal estate tax all together.  CLICK HERE TO READ ABOUT THE HOUSE VOTING TO DO JUST THAT A FEW MONTHS AGO.

Rest assured that the topic of estate tax (a/k/a “death tax”) will continue to be a relevant topic, especially with the upcoming Presidential campaign. Please also remember that regardless of the outcome of upcoming legislation dealing with this issue (or not), estate tax is currently an irrelevant consideration for more than 90% of Americans (including most all Utah residents). There are much more important life planning issues that are relevant for just about all people. As always, we are here to help.

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