Tax Whistleblower Loses Cases on Dillon Fortune

Clarence Dillion was a famous Wall Street journal financer, and he left behind two children when he died in 1979. One of Dillon’s children, Dorthy Dillon Eweson, died in 2005. In 2008, William Prentice Copper III, the boyfriend of the widow of one of Eweson’s grandchildren, Ann Peipers, filed with the IRS’s new Whistleblower Office two formal requests for an informant’s bounty. The requests claim that the Dillon family avoided $100 million in estate taxes by failing to pay generation-skipping tax and by ignoring a 1918 trust created by Dillon.

The IRS rejected Cooper’s requests, and Cooper sued asking the court to order the IRS to conduct an investigation. Last summer, Judge Dian L. Kroupa, a U.S. Tax Court Judge, ruled that Congress gave the tax court the authority to hear Cooper’s claims. Judge Kraupa stated that the court’s jurisdiction included any determination to deny awards and was not limited to determinations on the amount of awards. This week, however, Judge Kroupa granted the IRS’s motion to dismiss, stating that the court’s jurisdiction in a whistleblower case existed “only with respect to the [IRS] Commissioner’s determination of award.” Judge Kroupa stated, “[o]ur jurisdiction…does not contemplate that we redetermine the tax liability on the taxpayer.”

Further, Judge Kroupa stated that unless the IRS begins a legal or administrative action, then there can be no claim to a whistleblower bounty. “[B]ecause a whistleblower award is calculated as a percentage of collected proceeds, if the [IRS] collects no proceeds there can be no whistleblower award.”

For more information on the IRS Whistleblower Office and its history, see William P. Barrett, Tax Whistleblower Loses Dillon Fortune Case, Jun. 21, 2011.

Special thanks to Michael R. Loveridge (Attorney, Slat Lake City, UT) for bringing this article to my attention.