Many of the country’s wealthiest families live in the state of California. And many of these families have been involved in disputes with the Internal Revenue Service over estate taxes following the death of a loved one.
Estate tax is the tax applied on the property that is transferred upon a person’s death. The tax is determined by placing a value on everything the person owned at the date of death. Because the IRS uses fair market value to determine this amount, there can be disagreements over that the fair value should be.
In a recent example of this, the family of the real estate billionaire and owner of the Minnesota Twins, Carl Pohlad, is currently involved in a dispute with the IRS over the value of the baseball team’s value on the date Pohlad passed away in 2009.
The IRS claims Pohlad’s interest in the Twins was worth $293 million when he died and has claims the estate owes as $255.8 million in estate taxes.
The family, on the other hand, claims that Pohlad had transferred much of his interest in the Twins to his sons in the years leading up to his death. They say Pohlad’s interest in the Twins was $24 million at the time of his death.
Both parties will need to present evidence backing up their purported values of Pohlad’s estate when he died. The judge presiding over the case could end up siding with one party, or value Pohlad’s estate at somewhere in the middle.
The dispute demonstrates just how important effective estate planning is, especially when significant assets are involved.
Source: The Star Tribune, “Pohlad estate-tax trial begins Monday in Houston,” David Phelps, Sept. 29, 2014