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St. Louis Rams Buyer Gets Penalty Flag on Taxes

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  • St. Louis Rams Buyer Gets Penalty Flag on Taxes

    St. Louis Rams Buyer Gets Penalty Flag on Taxes

    Court papers indicate Shahid Khan will pay more in tax shelter case, but will fight 40% penalty.
    [www.forbes.com]

    A year ago, after Forbes reported an Internal Revenue Service challenge to his use of tax shelters, Shahid R. Khan, the Illinois businessman now buying the St. Louis Rams, told his hometown newspaper he had paid the disputed amount, which he put at $68 million. He said then he would sue for a refund.

    But a recent court filing by his lawyers suggests an unspecified portion of the amount hadn't been paid. Moreover, Khan's side now admits one of his partnerships is liable for that sum plus penalties over a way it tried to cut taxes through use of a scenario the IRS labeled a sham.

    Yahoo! BuzzThe developments come in papers filed in U.S. Tax Court, one of several legal forums in which Khan has fought IRS civil claims that he owed taxes and penalties on $250 million of income from 1999 to 2003. The feds said he employed "Son of Boss" and "Distressed Asset/Debt (DAD)" tax shelters to gin up phony losses that were used to offset real income from other business ventures.

    Khan has said he did nothing wrong other than, perhaps, follow the advice of trusted advisors. He now has sued some of them, saying they steered him wrong.

    Last month, Khan, 59, announced a deal to buy a controlling 60% interest in the Rams. Although Forbes had valued the football franchise at $913 million, the rumored price was $750 million, reflecting the sorry state of the team. Khan's bid is subject to National Football League vetting and requires approval of 75% of the team owners. Khan said he intended to keep the team in St. Louis.

    February was also the month that Khan's lawyers, in a Tax Court filing, conceded that one partnership Khan controlled wrongly claimed to be an investment company, which would have allowed a greater tax benefit for him from his tax-shelter ploys. Accordingly, the filing said, partners "will pay the full tax deficiency resulting from the loss disallowance"--seemingly acknowledging that the disputed amount hadn't been paid yet. The filing just became available to the public at the clerk's office of the Tax Court in Washington, D.C.

    tKhan's lawyers further wrote that the entity's partners--mainly Khan--"resign themselves" to paying a 20% penalty for accuracy-related negligence, but that they will later sue for a refund of that penalty. The lawyers said they would continue to fight in Tax Court the IRS effort to impose a 40% penalty for substantial misvaluation of the underlying assets in the tax shelter.

    Khan did not respond to requests for comment made to his office in Urbana, Ill.

    Exactly how much money is at stake in Khan's concessions is unclear, but it appears to be in the millions of dollars. However, he's probably good for the tab. While not on the latest Forbes list of the world's billionaires, Khan owns and heads Flex-N-Gate, an auto parts maker headquartered in Urbana with $2 billion in revenue that is the U.S.'s 223 largest private company.

  • #2
    Re: St. Louis Rams Buyer Gets Penalty Flag on Taxes

    Just confirms the fact that the vast majority of people with this kind of money are shady as hell.

    Not surprising at all in my opinion.
    Clannie Nominee for ClanRam's Thickest Poster

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