On January 9, 2023, after five years of litigation, the U.S. Tax Court entered a stipulated “no deficiency” judgment relieving Gray Reed client Belmont Interests Inc. of approximately $120 million proposed tax liability.
The IRS claimed that Belmont Interests, a Texas-based corporate group, owed nearly $120 million for tax years 2012 and 2013. The IRS' arguments were based on the duty of consistency, a doctrine that generally bars shifting treatment for items that fall into multiple reporting years, especially in cases in which the agency can no longer rectify potentially incorrect reporting from an earlier year because the statute of limitations has expired.
In September 2022, the U.S. Tax Court rejected the IRS’ arguments for tax year 2013 and said Belmont didn’t owe $94 million in tax for 2013 because it wasn't obliged to include certain debt-related items in calculating its liabilities. On January 9, 2023, the parties agreed that for both 2012 and 2013 the amount owed was zero.
“We are beyond pleased with the Court’s refusal to expand the duty of consistency beyond the legal limits for 2012, just as it did for 2013,” Gray Reed Partner Tom Rhodus says. “We’ve been litigating this case for five years and we couldn’t ask for a better outcome for our client.”
In addition to Rhodus, Belmont was represented by Gray Reed Tax Partners David Gair and Joshua Smeltzer. The case is Belmont v. Commissioner, T.C. Memo 2022-98, filed September 26, 2022.
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