Slammed: IRS Takes Big Chunk Out of Detroit Pistons Owner’s Estate
Who says the government is broke? The Internal Revenue Service (IRS) just took $388 million from the estate of Detroit Pistons owner Bill Davidson, according to Forbes.com.
A dispute arose after Mr. Davidson passed away and the IRS claimed it was owed $2 billion in estate, gift, and generation-skipping taxes.
The IRS argued that the Davidson Estate undervalued corporate stock and improperly valued self-cancelling installment notes (SCINs). As to the stock, the IRS said that the estate low-balled the value of privately held Guardian stock held in trust for Davidson’s children and grandchildren.
Mr. Davidson’s estate took the IRS to U.S. Tax Court challenging the assessment of any additional taxes, especially taxes worth $2 billion. The parties agreed to a settlement and the Davidson Estate will pay $187 million in gift taxes, $152 million in estate taxes, and $49 million in generation-skipping taxes. Certainly a sizable chunk of money, but far less than the initial assessment of $2 billion that the IRS claimed it was owed.
Take-Aways from this Case
You need to pay attention to valuations of assets like privately-held stock or real estate or art for gift and estate tax purposes. With sizable estates, the IRS scrutinizes the valuation of those assets when analyzing whether additional taxes are owed to the government.
Keep in mind, these tax legal battles are not confined to billionaire estates. If an estate has hard-to-value assets (e.g., SCINS), it may raise a red flag with the IRS and have to be resolved via litigation. Even estates below the $5.43 million estate tax exclusion may need to file estate tax returns with audit times that are limitless for hard-to-value assets, according to the Forbes article.
These tax disputes are a prime example of why you need an experienced estate planning attorney to help ensure your estate is organized and capable of holding up under the scrutiny of an IRS audit.