Levy Estate Fights the IRS

Norman F. Levy, a New York City real estate tycoon, died in 2005 leaving a $1.09 billion estate to charity and his family. Since his death, his estate has encountered many setbacks. First, Madoff swindled the estate out of hundreds of millions of dollars, forcing two Levy charities to close. Second, the estate paid $220 million to the Madoff bankruptcy trustee to repay withdrawals made before the Ponzi scheme collapsed in 2008.

Now the estate is fighting the IRS over a $61 million estate tax bill. Levy’s will put $905 million into a charitable lead annuity trust (CLAT) in order to minimize estate taxes and benefit the Levy family and charity. Due to the CLAT, the Levy family calculated a taxable estate of $98 million and paid $46 million in federal estate taxes. The IRS valued the estate at $226 million, claiming a total tax of $105 million plus $2 million in penalties. Some of the dollar disputes between the family and the IRS include:

• Valuation disagreements over partially-owned real estate assets
• Co-executor commission amounts due to gross estate miscalculation
• Theft loss claims that arose from Madoff’s (then executor of the Levy estate) scheme

See William P. Barrett, Family Swindled by Madoff Fights $61 Million IRS Bill, Forbes.com, April 21, 2010. 

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this to my attention.