Billionaire, Bermuda reinsurer seek $186m IRS refund amid ‘politically charged atmosphere’
A billionaire investor and his family’s Bermuda’s IAT Reinsurance are suing the US Internal Revenue Service for refunds of $186 million in taxes and interest they paid after the IRS revoked IAT’s tax-exemption retroactively.
Forbes reports that in court documents, Peter R Kellogg and IAT claim IRS officials were “unduly prejudiced” against them by a “politically charged atmosphere” created by journalists and that the IRS arbitrarily timed the revocation to maximise the taxes owed and “punish” them.
“The IRS also disallowed IAT’s deduction of $1.3 million in business and personal travel expenses for Kellogg in 2000 and 2001,” Forbes reports. “ IAT argues its board properly authorised payment for Kellogg’s personal travel since it ‘recognised the need for Mr Kellogg to travel privately because of his status including being listed by Forbes magazine’.”
Forbes estimates that Kellogg, 70, is worth $2.7 billion. He ran Wall Street’s top market maker, Spear, Leeds & Kellogg, until engineering its sale to the Goldman Sachs Group in 2000 for $6.5 billion.
Forbes continues: “Kellogg’s use of a 501(c)(15) tax exempt insurance company to shield hundreds of millions in capital gains from tax was first exposed in a March 2001 Forbes cover story on the proliferation of edgy and over the edge tax shelters, ‘Are You A Chump?’ Back then, the law limited the tax exemption to companies writing no more than $350,000 a year in premiums, but did not cap the investment income or assets exempt insurers could have. So in 1999, Forbes reported, IAT wrote $3,330 in premiums, earned $179 million on its investments and ended the year with $330 million in assets. (Full disclosure: I was the author of that Forbes article.)”
IRS spokeswoman Michelle Eldridge noted the agency “is prohibited by federal law on commenting on specific taxpayer cases and situations” and also “does not generally comment on ongoing court cases or pending litigation.
But she e-mailed Forbes that “The IRS stresses audits are based on the information contained on the tax return and the underlying tax law — nothing else. Politics play no factor in audit selection.”
A spokesman for Kellogg and IAT referred calls to his lawyer who did not return a call and e-mail requesting comment, Forbes said.
For the full story see http://www.forbes.com/sites/janetnovack/2013/06/17/billionaire-seeks-186-million-tax-refund-claims-irs-biased-by-politically-charged-atmosphere/2/