Sunday, July 21, 2013
As I have previously discussed, owner of the Minnesota Twins, Carl Pohlad died in 2009. The Twins worth has shot up to $578 million. However, according to an unreported lawsuit filed by Pohlad's estate it valued the Twins worth at only $24 million to the IRS.
According to Jim Pohlad, estate planning included the transition of business operation from father to son. Carl Pohlad's three sons, the executors, had to resolve the deficiency of unpaid estate taxes through negotiations with the IRS. The dispute stems from Carl Pohlad's fractured ownership interest in the Minnesota Twins. At Pohlad's death, he owed 52.2% non-voting interest in MT Sports LLC, which held a 99% ownership interest in the Minnesota Twins LLC. Additionally he owned 95.5% equity interest in Twins Sports Inc., the managing Minnesota Twins member. The managing member has the power to hire and fire personnel, borrow funds, and other powers. Mr. Pohlad only owned 10% of the voting shares in Twins Sports' and the rest was split between his brothers. Thus, he owned the majority of the franchise but held no control over 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.