The IRS Whistleblower Office was established by a 2006 law which strengthened tax informants' rights and specified a minimum 15 percent bounty for providing tips concerning tax fraud. Since the law's passage, the IRS has had a flood of cases involving unpaid taxes.
Last week, a U.S. Tax Court dismissed litigation by a whistleblower who had requested an informant's bounty for providing information supporting alleged tax fraud on the part the estate of Dorothy Dillon Eweson. Eweson is one of two children of Clarence Dillon, a reputed Wall Street financier who lived from 1882 to 1979. Dillon is widely thought to be one of the first advocates of leveraged buyouts. Dorothy Eweson apparently died in 2005 and left behind an estate valued around $300 million.
In 2008, William Prentice Cooper III, the boyfriend of Ann Pipers-the widow of Eweson grandchild-made two requests to the IRS's new Whistleblower Office for an informant's bounty. He claimed that the Eweson family avoided $100 million in estate taxes by failing to pay generation-skipping tax connected to a trust established in 1918.Cooper sued the IRS after receiving a rejection of his request for a whistleblower reward.
Last week, the U.S. Tax Court dismissed Cooper's case after IRS commissioner issued a memorandum to Cooper explaining his conclusion that there is no estate or gift tax due on the facts presented by Cooper. The Tax Court explained its dismissal by saying that its jurisdiction was limited to the IRS Commissioner's award determination, and that Cooper has no claim to a whistleblower award unless the IRS begins an administrative or legal action against the estate. Cooper is reportedly examining his options after the ruling.
Whistleblower suits have become an increasingly active area of law since the passage of Dodd-Frank, which provides securities whistleblowers with incentives and protection.
Source: Forbes, "Tax Whistleblower Loses Fortune Case," William P. Barrett, 21 June 2011.