Sirote & Permutt Successfully Defends Case Against IRS
David Wooldridge and Ronald Levitt, attorneys at Sirote & Permutt, P.C., recently represented former Waffle House waitress and lottery winner Tonda Dickerson against the Internal Revenue Service (IRS) and prevented her from having to pay nearly $700,000 of her winnings in taxes. On March 7, 2012, exactly 13 years after receiving her lottery ticket, the U.S. Tax Court reduced Dickerson’s tax payment to the IRS by more than 87 percent.
The tax controversy arose after Dickerson attempted to share her lottery winnings with her family and the IRS issued Dickerson a bill for unpaid gift taxes of nearly $1 million. Dickerson then engaged Sirote lawyers Wooldridge and Levitt to challenge the IRS.
“When defending a client in a tax case, it’s important to think outside of the box,” said Wooldridge. “With the extreme complexity of this case, we had to make sure that we were creative and remained focused on the details in order to present this case in the best manner for the client.”
Prior to this lawsuit, Dickerson’s lottery winnings brought about another court case. While working at Waffle House, Dickerson was given her winning lottery ticket by a frequent customer. Dickerson’s fellow employees sued, claiming that they had a verbal contract with Dickerson to share the winnings if any of them were to ever receive a winning lottery ticket. In this case, where Dickerson was also represented by Sirote & Permutt lawyers, the Alabama Supreme Court eventually ruled that the claims by the fellow Waffle House employees were invalid since the claim was based on a contract related to gambling and that since contracts related to gambling were illegal, the claims by the former co-employees was not enforceable. As a result, the former employees’ claims were defeated.
The previous claims against Dickerson proved important in Dickerson’s tax dispute with the IRS. Wooldridge and Levitt argued that the value of the lottery ticket (as claimed by the IRS) should be greatly discounted since Dickerson’s coworkers had demanded and brought a legal claim that Dickerson should be required to split the winnings among them. The Tax Court acknowledged and agreed that the existence of that claim reduced the value of the ticket since an independent third party would take the existence of the claim into account to determine what the ticket was worth.
“While we found no case law exactly on point, we knew that the value of the lottery ticket would be impacted by the existence of the former co-workers’ claims. Happily for Dickerson, the Tax Court agreed,” said Levitt. “It was a creative use of theory and the Tax Court judge saw that it was fair. We are pleased with the result.”
About David Wooldridge
Wooldridge represents clients in tax controversy cases involving both the IRS and Alabama Department of Revenue. Most recently, his legal practice has had a particular emphasis on defending conservation easements, such as the landmark Kiva Dunes case in US Tax Court. During his 31 years with Sirote, Wooldridge’s practice has included tax planning, state and local tax issues, family succession and business planning, shareholder oppression, and director and fiduciary liability issues. In 2012 he was elected to the American College of Tax Counsel, a professional association of tax attorneys recognized for excellence in the tax profession. Of the 15 ACTC members in Alabama, four are attorneys who practice at Sirote, the second largest group of attorneys at a law firm in the state. From 1992-99, Wooldridge served as Sirote & Permutt’s Managing Partner.
About Ronald A. Levitt
Levitt handles federal and state controversy matters, estate planning and charitable deduction planning, including planning and defending conservation easements. He counsels clients in business planning, succession planning, entity formation; development of S Corporations, Limited Liability Companies and other flow-through entities, mergers and acquisitions; purchases and sales of businesses; and healthcare law. In 2012, Levitt, already a fellow, was elected as a regent of the American College of Tax Counsel. Best Lawyers also selected him as a 2012 “Best Lawyer of the Year in Tax Law.” Levitt, a Martindale AV rated attorney speaks throughout the country and is a frequent author. Most recently he co-authored an article in Taxation of Exempts, as well as the Lexis Nexis treatise “Tax Planning for S Corporations (2011).”