The estate of the late owner of the Detroit Pistons has sued Deloitte Tax LLP to recover $500 million in taxes, fees, and penalties over a tax plan from the advisor, according to a report in AccountingToday. One of the problems involves the IRS taking issue with the valuation of self-canceling installment notes (SCINs).
SCIN game: In addition to owning the Pistons, William Davidson owned the Tampa Bay Lightning hockey team and Guardian Industries (one of the country’s largest private companies). In 2013, the IRS filed a petition against his estate, claiming that it was undervalued and that it owed $2.8 billion (yes, that’s billion) in taxes. In addition to the undervaluation allegation, the IRS questioned the SCIN technique of selling assets to heirs based on a payment schedule that includes a provision that cancels the payments when the seller dies. The IRS said Davidson made errors in figuring his life expectancy, which caused the heirs to pay much less than fair market value
The matter was recently settled, apparently in favor of the estate, according to SRR’s Estate and Gift Taxation Valuation blog, which goes into details about the use of the SCINs. The lawsuit alleges that Deloitte did not adequately disclose the risks of the plan, but the firm says it will fight the lawsuit, says the report.
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