Carl R. Pohlad was the financier and owner of the Minnesota Twins franchise from 1984 up till his death in 2009. Pohlad’s estate is currently in the midst of a dispute with the IRS over its estate tax filing.
The dispute concerns the amount of Pohlad’s ownership stake in the Minnesota Twins. According to his estate tax return, filed in January 2009, that amount was $24 million. The IRS, however, believes that amount should have been $293 million. Valuation disputes can be somewhat complicated, particularly with investments involving privately held firms.
One of the issues in the case is whether Pohlad’s sons persuaded the valuation expert to drop his valuation estimate. The chasm between the IRS estimate and Pohlad’s estimate, however, is quite large. Jim Pohlad, who was an integral part of his father’s estate plan, says that they knew that the IRS would review their estate tax return, and comments they have made significant progress in negotiations with the agency.
Estate tax disputes with the IRS are not all that uncommon. Another one is going on right now with the estate of former Detroit Pistons owner Bill Davidson. In that case, the estate is challenging the government’s claim that the estate owners over $2 billion in estate taxes generated by underpayments in estate taxes, gift taxes, and penalties.
Estate tax minimization is an important thing for anybody with great wealth, but especially for this with a family-owned business. It is common for patriarchs to pass control to heirs prior to death in an effort to minimize the value of their taxable estate. In utilizing this strategy, though, timing is important.
Source: Star Tribune, “Schafer: Pohlads’ dispute with IRS over team’s value was just estate planning,” Lee Schafer, July 20, 2013.