If you aren’t convinced the IRS is going after wealthy taxpayers – the story of Bill Davidson’s estate may convince you otherwise. An article in the Detroit Free Press titled: Estate of Bill Davidson Battles IRS over Massive $1.9 Billion Tax Debt reports that attorneys for the estate of the late William Davidson are taking the IRS to court claiming the agency is wrongly trying collect about $2 billion in taxes out of the estate they state are not due.
Here are some highlights about the Davidson case:
- The IRS claims that the estate underpaid taxes in wealth transfers made by Davidson to family members involving estate taxes, gift taxes, stock transfers. IRS’ contends that the stocks were undervalued before being placed in the trusts of Davidson’s children or grandchildren in the months before Davidson died.
- The IRS has calculated the worth of Davidson’s taxable estate and gifts at $4.6 billion. It set the estate tax and IRS penalties on that amount at $1.9 billion. While investigating, the IRS also found deficiencies from back in 2005 of more than $900 million in gifts and other taxes it claims should have been paid.
- The estate tax alone — $1.9 billion — would represent more than one-tenth of the $13 billion collected through that tax nationwide in 2010, when taxes on most estates of those who died in 2009, like Davidson, were paid.
- This is one of the largest estate cases of its kind.
- In 2008, Davidson was named the 62nd-richest man in the U.S. in 2008, with a net worth of $5.5 billion. A native Detroiter, Davidson built Guardian Industries into one of the world’s leading makers of glass, automotive and building products. Davidson owned several sports franchises including the Detroit Pistons, the WNBA’s Detroit Shock and NHL’s Tampa Bay Lightning. He was enshrined in the Basketball Hall of Fame in 2008.
- Davidson estate’s lawyers argue that no more taxes are due and that the IRS is overvaluing the stock in question. Attorneys not related to the case said they couldn’t think of any recent case with a larger tax deficiency in dispute than this one. They have also remarked the size of the deficiencies is striking as it relates to an individual not a large corporation.
- Many following the case believe it will get tied up in litigation for some time.
- The article highlights the estate-planning strategies the ultra-wealthy use to pass on their assets – where the estate tax generally kicks in for estates of more than $5.25 million.
Whether the IRS has a case against Davidson’s estate or not, the mere fact remains: the wealthy are being targeted by the IRS now more than ever. Here are some recent audit statistics from a Tax Resolution University blog post that back up this assertion:
Information on recent audit rates:
- The IRS audits 12.5% of those earning $1 million in 2011 – up from 8% in 2010.
- About 4% of those earning $200,000 or more are audited- up from 3% in 2011.
- Businesses with $250 million in assets have a 27.6% audit rate compared with a 1% audit rate for firms with less than $10 million in assets.
Collection efforts by the IRS have been focused on those individuals and businesses where it thinks it has the best chance of yielding additional tax dollars.
If you have received an IRS notice or are currently under audit – don’t mess around with the IRS; seek tax relief now! Contact a tax professional who has expertise handling IRS audit cases to help you resolve your IRS problems for good.
More Tax Help, IRS News and Tax Relief Tips:
- TaxMan on Big Biz Show-Avoid Business Audits
- IRS Tax Help Basics for the Self-Employed
- Filing Joint Tax Returns? Prevent IRS Problems
- IRS Audits of Wealthy Taxpayers Are Paying Off
- Tax Resolution After Receiving IRS Audit