Lone accountant takes on IRS and wins

Lawyer News

It took seven years, but Charles Ulrich did something many people dream about, but few succeed at: He beat the IRS in a tax dispute.

Not only that, but tax experts say potentially millions of other taxpayers could benefit from his victory.

The accountant from Baxter, Minn., challenged the method the IRS has used for more than 20 years to tax shares and cash distributed by mutual life insurance firms to their policyholders when they reorganize as public companies.

A federal court recently agreed with his interpretation.

"There's a tremendous amount of money at stake," said Robert Willens, a New York City-based tax analyst at Robert Willens LLC. "Tens of thousands of people could be in line for a refund."

Don Alexander, an IRS commissioner in the 1970s and now a tax attorney in Washington, said while it's not unusual for individuals to take on the agency, "most of them lose."

Alexander called it "quite a significant case."

The dispute arose when more than 30 mutual life insurance companies became publicly traded corporations in the late 1990s and earlier this decade, in a process known as "demutualization."

Mutual companies are owned by their policyholders, so the companies provided stock and cash to compensate them for the loss of their ownership interests when they went public.

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