A billionaire hedge fund manager claims bad tax advice caused him to lose $43 million in tax deductions for charitable contributions he made.
And you thought your tax adviser was bad!
Forbes magazine reports that Leon G. Cooperman filed a lawsuit in U.S. Tax Court trying to get his tax breaks reinstated after the IRS said no to the itemized deductions on Cooperman's 2005 and 2006 personal returns.
As part of the filing, Cooperman concedes that since he made the deduction claim, he's learned that tax law doesn't allow non-publicly traded securities to be given to a private foundation.
He told the magazine that his chagrin at inadvertently violating tax law quickly turned to anger when he realized the mistake and, he says, that he made the tax misstep based on bad professional tax advice.
The court papers indicate that Cooperman's longtime personal accountant, a CPA with Gittelman & Co. in Clifton, N.J., and appraisers from RSM Business Services and Duff & Phelps did the work. RSM Business Services is part of RSM McGladrey, the nation's fifth largest accounting organization, and that section of the business, reports Forbes, is owned by H&R Block.
Cooperman has gone to tax court to fight the $14 million in back taxes Uncle Sam says he owes on the disallowed charitable deductions, along with another $5 million in penalties the IRS assessed.
The IRS doesn't respond to lawsuits, but the chances of Cooperman being let off the hook for the back taxes are slim. What he's really hoping for is the waiver of the $5 million in penalties.
The reason the billionaire and his attorneys say Cooperman shouldn't have to pay that amount is because Cooperman relied in good faith on experienced tax pros and shouldn't be penalized for their errors.
Good luck with that one, too, Leon. Although a jury of regular taxpayers bought the bad advice argument in Wesley Snipes tax fraud trial and found him guilty of the lesser failure to file charges, I suspect a tax court judge might not be so forgiving.
So there. Don't you feel better? Even rich guys can get bum, and costly, tax advice.
You can protect yourself by thoroughly checking out your tax professional before you hire him or her.