Dallas' Richest Man Sues IRS for $200 Million
When Forbes estimates your net worth at $8.5 billion, dropping $1 million to solve a math problem or losing $16 million in a particularly disastrous weekend of poker amounts to little more than rounding errors on your checking account. But once the debits creep into nine figures, once you start flushing $200 million down the toilet in a failed rocket-launching enterprise, for example, or when the IRS declares $200 million in tax deductions invalid, you feel it.
Dallas billionaire Andrew Beal has been fighting the latter battle for several years now. Two years ago, the Department of Justice issued a boastful press release declaring victory in its tax battle with Beal after the 5th U.S. Circuit Court of Appeals in New Orleans handed down its decision in the case.
The specifics of the matter are complicated, but the court basically ruled that Beal and his accountant had established a sham partnership, Southgate Master Fund, LLC, purchased a lot of bad Chinese debt on the cheap, then sold it to make it for what on paper was a $1 billion loss, which they claimed as a deduction on Beal's personal income tax return.
The government's victory was only partial, however. The court ruled that Beal had, in fact, intended to make profit when he formed Southgate Master Fund but had decided instead to use it as a tax shelter once the investment tanked, and it voided tens of millions of dollars in penalties the IRS had levied against him.
Matter of fact, the opinion was mushy enough that Beal also could declare victory, as he did Monday in pair of lawsuits against the IRS. The agency hasn't yet refunded the penalties and interest to which the appeals court said he was entitled, he claims. More than that, the IRS has gone after his investments with relentless zeal, levying $450 million in taxes and penalties that are "grossly incorrect, arbitrary and capricious even under the IRS's flawed theory of liability."
So, he wants the agency to refund $200 million he's handed over to the IRS since 2002. He'll take more, if the court will allow it.
He has four lawyers on the case, possibly more behind the scenes. It's their job to convince a federal judge to rule in their client's favor and, it seems, to dig up another judge's description of Beal as "an aggressive risk-taker, a noted gambler who makes big bets. Sometimes he wins, and sometimes he loses -- but he plays the game above board."