A Texas billionaire will be required to pay major tax penalties to the Internal Revenue Service, according to a ruling from the nation’s highest court. U.S. Supreme Court justices decided that the man, who allegedly tried to hide more than $45 million from the IRS, must pay enormous penalties and interest. Experts say that the ruling could lead to the collection of hundreds of millions of dollars from other, similar taxpayers who are involved in disputes that resemble this case.
Official reports show that the man and his business partner created a tax shelter in 1999 that would manufacture financial losses, allowing the pair to offset taxes for windfall gains that were expected that year. That tax shelter had been identified as illegal by lower courts, but the man and his partner insisted that the 40 percent IRS penalty in the matter should not apply to their case.
Ultimately, the pair invested in a company that was designed to fail, allowing them to hide more than $45 million in income from the federal government. Penalties and interest will also be applied to that amount, which could deal a major financial blow to the two business partners. Attorneys in the case called the outcome an “impressive win for the government,” as the ruling will have significant impact on a variety of other suits throughout the nation.
Individuals who have violated tax codes may be vulnerable to penalties and interest, along with tax liens and a variety of other unsavory results. Now, those accused of hiding their money in tax-shelter companies could also suffer additional punishment. Tax and business attorneys can help those with tax concerns learn more about their legal rights, especially in light of this new Supreme Court ruling.
Source: Reuters, “US Supreme Court rules Texas billionaire owes tax shelter penalty” Patrick Temple-West, Dec. 03, 2013