A high-stakes standoff between the IRS and the estate of the late Carl Pohlad, the real estate billionaire who owned the Minnesota Twins, is set to begin Monday in a Houston courtroom.
The dispute, which will be in front of a judge from the U.S. Tax Court, involves an IRS claim that the Pohlad family, which still owns the Twins and has extensive banking and real estate development holdings, owes as much as $255.8 million in estate taxes.
Attorneys for the Pohlads, however, assert that the IRS’ tax calculations are flawed and greatly overstate the senior Pohlad’s remaining interest in the Twins when he died in 2009.
The nonjury trial is expected to last less than a week and will mainly involve expert witnesses on estate valuation issues. Jim Pohlad, one of the three sons of Carl Pohlad who are executors of the estate, is scheduled to be a witness for the family.
The Pohlad estate received a notice of deficiency from the IRS in March 2013. The estate then petitioned the Tax Court in June 2013.
Final resolution of the matter could be as long as a year from now, according to estate law experts.
Once the trial is complete, both the IRS and the Pohlad estate will have 90 days to file their summary briefs with the court and then another 45 days to file rebuttal briefs. Then the presiding judge in the case will begin deliberations.
“The wheels of justice turn slowly,” said Mavis Van Sambeek, a trust and estates attorney with the Minneapolis law firm of Lindquist and Vennum.
When the Pohlads filed their petition with the Tax Court, the family said it would work with the IRS to resolve the matter through negotiations. The opening of a trial indicates those negotiations were inconclusive.
“The parties must be very, very apart or they would have settled by now,” Van Sambeek said.
The Pohlad position is that Carl Pohlad transferred most of the control of the Twins to his sons in the years leading up to his death.
The estate valued Carl Pohlad’s interest in the team at $24 million when he passed away. The IRS valued his interest at $293 million. Forbes magazine estimated the total value of the Twins to be $356 million at the time, which was before Target Field opened and when the Twins were still playing in the Metrodome.
Van Sambeek said the Pohlad estate isn’t the only high-profile or sports family with an IRS dispute. The estate of the former owner of the Detroit Pistons, William Davidson, faces a $2 billion tax bill, for instance. And the agency is seeking $700 million from the estate of pop star Michael Jackson.
“We think of Form 706 [the estate tax return] as an opening bid with the IRS,” Van Sambeek said. “But the taxpayer has the burden of proof.”
In the trial, Van Sambeek said a judge can find one expert witness more believable that another “or split the baby down the middle.”
The Tax Court trial is in Houston at the request of the Pohlad estate attorney, John Porter, whose law firm, Baker Botts, is based there.