Houston Tax Court to weigh in on estate valuation issues

In an expected weeklong trial, the family of Carl Pohlad, a billionaire real estate developer and owner of the Minnesota Twins, will argue that the Internal Revenue Service estate tax calculations overstate Pohlad’s remaining interest in the baseball team at his death. The IRS argues the estate owes approximately $255 million in estate taxes.

The IRS challenged the valuation listed on the Form 706 (estate tax return) and sent a Notice of Deficiency to the Pohlad estate in March 2013. A tax court appeal was filed in June 2013.

The estate valued Pohlad’s remainder interest in the team at $24 million when he died. However, the IRS valued that interest at $293 million. The drastically different valuations could have made it more challenging to reach a settlement.

The trial will focus on valuation issues and the judge will hear from expert witnesses as well as one of Pohlad’s three sons. The estate will argue that Pohlad transferred his ownership interest in the team to his sons before his death.

After completion of a trial, both sides have 90 days to file briefs summarizing their arguments and any supporting case law. After the initial briefs, there is a 45-day window to file rebuttals. Then the judge begins deliberations. No fixed deadline exists for the judge to issue an opinion.

There are several types of opinions. When a case involves factual determinations, a Memorandum Opinion is common. When the Tax Court finds the case touches on an important legal principle, it may issue a Tax Court Opinion. It is possible to appeal either type of decision.

A change in the valuation of a gift can greatly increase the amount of taxes owed. Seeking the assistance of a tax attorney who can navigate you through IRS negotiations to a potential trial is important.

Source: Star Tribune, “Pohlad estate-tax trial begins Monday in Houston,” David Phelps, Sept. 29, 2014