Does taking the IRS to court hurt your chances of settlement?

Whether you own a small business, are reporting individual income taxes, or have recently received an inheritance, chances are that you will have to file a return with the Internal Revenue Service. Each of those contexts, unfortunately, presents the opportunity for a potential IRS dispute.

In a recent example, the estate of the late owner of the Minnesota Twins, Carl Pohlad, recently found itself in hot water with the IRS. Specifically, the IRS claimed that the estate owed over $250 million in federal estate tax. The IRS calculation was reportedly based on its calculation of Pohlad’s ownership interest in the Twins at the time of his passing. However, the beneficiaries of the Pohlad estate disagreed with that valuation and proceeded to litigation. 

Notably, the lawsuit, filed in 2013, only recently reached a settlement. In exchange for a payment of $36 million, the IRS agreed to the satisfaction of all tax obligations of the estate, including interest that may have accrued since 2013.

As an attorney that has helped many clients with tax controversies, I know that the prospect of a lawsuit against the IRS can be intimidating. For such clients, I provide information about the spectrum of appeal options that may be available to them, including alternative dispute resolution and administrative appeals with the IRS. In fact, the IRS’ website claims that the agency’s Office of Appeals helps more than 100,000 taxpayers every year to resolve their tax disputes outside of Tax Court. The IRS also offers mediation services. 

However, I would caution against utilizing such administrative routes without the representation of a tax attorney. Individuals may have questions about whether recommendations by the Office of Appeals or a mediator are binding upon them, or even fair, for that matter. An attorney can help answer those questions.

Source: Bring Me the News, “Pohlad estate settles with IRS over disputed $250M tax claim,” Shayus McLaughlin, Aug. 20, 2015

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