May 22, 2011
Smith met the next day with Daniel and Marilyn. “Okay here’s the deal. We can settle now for about $5 Billion in estate taxes and interest or we can fight this, or we can counter-offer.” Daniel thought about it and asked, “If we don’t settle what are our chances in Court?” Smith thought for a second, “Pretty good, I think. The legal bills will total $200-300,000, which are deductible. The facts are better for us than for them, but they have the presumption of correctness, but the problem for them is that under Virginia law, your father is presumed to have died on August 9, 2010. They’re going to have a tough time with that one.” Daniel ran the numbers in his head, “Let’s offer them $100 Million and see how big their balls are”, smiling as he said the words. “That’s a whole lot of money to walk away from. I mean that equals some Congressman’s entire career’s worth of pork.”
Smith called the Jackson on the telephone. “Mr. Jackson, I’m going to fax you a letter, but I wanted to let you know our thoughts. I talked it over with the family and we do not believe we owe you a dime. However, there is always some small risk in litigation, no matter how ridiculous and we consider this to be legalized extortion. That said, we’ll offer you $100 Million total (including interest), you waive all penalties.”
Jackson called the Head of Appeals, the District Director and District Counsel and Congressman Witherspoon, this was a conference call that required everyone’s input including a member of Congress who served on the Joint Committee on Taxation. “Okay, we have an offer of $100 Million from Mr. Frome’s family. Our demand was $9 Billion. Our offer to settle was about $5 Billion. They have a pretty strong circumstantial case. They have the state law presumption that the date of death is the date the body is found. They have numerous witnesses who thought they saw the decedent on January 1, 2010. They have the children’s testimony that he went outside. They have the maid’s testimony that she talked to the Decedent on December 25, 2009. They have post mortem frostbite which tends to confirm their story, not ours. All we have is that no one can positively say that they saw his entire face, but they did think they saw him.” The District Counsel frowned. “Boy, we’d be out on a limb on this one. No doubt about it, their case is better than ours. What do you think?”, he asked the District Director. The District Director thought for a minute. “I think this is a big enough case that we need to hear what the Commissioner has to say. They’ve offered us a ton of money which we all know is a test of our will. On the other hand, their case is much better than ours and we’ll go into Court pretty much buck naked. The question is, Is this the test case we ought to litigate?”
After being briefed in great detail, Mort Copeland, the Commissioner of the Internal Revenue Service responded, “Let’s litigate it. I really don’t want to leave $9 Billion on the table and while you’re at it, add in the fraud penalties. I mean, either they faked this whole scenario, or they didn’t. If the Court finds that they made all this up, they’re liable for fraud penalties. That means the tax rises to their entire net worth. Let’s see if they’re willing to see this bluff through, although if they offer one Billion or more, let’s talk again.”