Executors Claim Careful Estate Planning Lead To IRS Deficiency

As I have previously discussed, owner ofthe Minnesota Twins, Carl Pohlad died in 2009. The Twins worth has shot upto $578 million. However, according to an unreported lawsuit filed by Pohlad’sestate it valued the Twins worth at only $24 million to the IRS. 

According to Jim Pohlad, estate planningincluded the transition of business operation from father to son. Carl Pohlad’sthree sons, the executors, had to resolve the deficiency of unpaid estate taxesthrough negotiations with the IRS. The dispute stems from Carl Pohlad’sfractured ownership interest in the Minnesota Twins. At Pohlad’s death, he owed52.2% non-voting interest in MT Sports LLC, which held a 99% ownership interestin the Minnesota Twins LLC. Additionally he owned 95.5% equity interest inTwins Sports Inc., the managing Minnesota Twins member. The managing member hasthe power to hire and fire personnel, borrow funds, and other powers. Mr. Pohladonly owned 10% of the voting shares in Twins Sports’ and the rest was split betweenhis brothers. Thus, he owned the majority of the franchise but held no controlover it. The IRS assigned a penalty for gross valuation misstatement and added $121 million extra in taxes.

See Lee Schafer, Schafer: Pohlad’s Dispute With IRS Over Team’s Value Was Just Estate Planning, Star Tribune,  Jul. 20, 2013.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.