Widow Fights $40 Million Taxes on Art

     HOUSTON (CN) – The IRS taxed a Texas tycoon $40.6 million on the false belief he had taken ownership of a treasure trove of art including works by Picasso, Monet and van Gogh, his widow claims in court.
     Barbara B. Allbritton sued the United States for herself and the estate of her husband, self-made millionaire Joe L. Allbritton, on Jan. 30 in Federal Court.
     Joe Allbritton died in 2012 at 87, ending a life fit for the big screen. After a stint in the Navy during World War II, and graduating from Baylor College of Law, Allbritton took out a $5,000 loan to buy land outside Houston. He made a nice profit selling the land, which was used to build a freeway from Houston to Galveston, and founded San Jacinto Savings and Loan.
     Allbritton’s banking success was a springboard for his foray into media holdings. He bought The Washington Star newspaper in 1975 and several affiliated TV stations.
     The Federal Communications Commission forced him to sell the newspaper in 1978 due to its rules against ownership of print and broadcast media in the same market, and he kept the TV station, which became the keystone for Allbritton Communications, which amassed a chain of eight ABC-affiliated stations.
     Joe and Barbara Allbritton’s son, Robert Allbritton, led Allbritton Communications from 2001 until it was bought out for $985 million in August 2014. Robert Allbritton stayed in the media business. He owns Capitol News Company, parent of the political news website Politico.
     Allbritton Communications was a subsidiary of the Allbritton family’s private holding company, Perpetual Corporation.
     With Joe Allbritton at the helm, Perpetual acquired an eclectic investment portfolio.
     “Perpetual has invested in businesses and assets such as television and broadcasting, print media, digital media, horse breeding and racing, insurance, mortuaries and cemeteries, fine art, and real estate. Perpetual also has a long history, dating back to before 1958, of investing in appreciating assets such as art,” the complaint states.
     Barbara Allbritton says that after her husband died the art became an issue for the IRS, which sent her a “notice of deficiency” in 2013, claiming she owed $40 million in taxes for the years 2005 through 2008.
     The agency’s math is based on its belief that Perpetual Corp. distributed artwork and antiques worth $139 million to Joe Allbritton in 2005, and that Perpetual paid the Allbrittons $364,000 to insure the art and antiques from 2005 to 2008, payments that constitute “taxable dividends,” according to the complaint.
     Barbara Allbritton says she paid the IRS $40.6 million “under protest.” She sued it for a full refund.
     Barbara Allbritton’s main point in the lawsuit is that Perpetual never transferred ownership of the art to Joe in 2005.
     “There is not a single bill of sale, sales slip, invoice, purchase agreement, ownership transfer document, or anything else reflecting a sale or transfer of the art from
     Perpetual to Joe L. Allbritton in 2005,” the complaint states.
     Given the lack of evidence, the IRS was wrong to whack the couple with its massive income tax bill, Barbara Allbritton says in the 23-page complaint.
     “As to the purported ‘dividend’ from Perpetual for its payment of art insurance premiums, there could be no dividend because the payment was properly for Perpetual’s benefit,” Barbara Allbritton adds.
     The art the IRS claims was part of the “2005 Purported Distribution” would make any curator blush. The complaint lists 33 paintings that were allegedly part of the distribution, among them works by Paul Cezanne, Winslow Homer, Paul Gaugin, Pablo Picasso, Claude Monet and Vincent van Gogh.
     Barbara Allbritton is represented by Reagan Brown with Norton Rose Fulbright of Houston.
     She says in the complaint that she and her son, Robert, are the co-executors of Joe’s estate, and that Robert gave her authority to pursue the tax refund.
     Speaking on behalf of the IRS, a Justice Department spokeswoman said: “Once we are able to review the case fully, we will consider our options and respond as appropriate with the court.”

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