NetJets Wins Case Against IRS Over $366 Million In Taxes & Penalties

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NetJets Wins Case Against IRS Over $366 Million In Taxes & Penalties
By Mark Hirschey (Work of Mark Hirschey) [CC BY-SA 2.0], via Wikimedia Commons

A federal judge ruled prohibiting the IRS from ignoring a guidance issued to a NetJets predecessor in 1992

NetJets, private aviation company won a case against the United States Internal Revenue Service (IRS) in connection with the $366 million in taxes and penalties the agency claimed as past due, according to report from Andrew Harris of Bloomberg.

NetJets is a wholly-owned subsidiary of Berkshire Hathaway, the conglomerate controlled by Warren Buffett.  The billionaire investor was one of the satisfied customers of NetJets before he decided to acquire the private aviation company in 1998 for $725 million in cash and stock.

NetJets offers fractional aircraft ownership to individuals and businesses and it also provides maintenance and services. The company is based in Columbus, Ohio.

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IRS prohibited from ignoring previous guidance issued to NetJets

United States District Judge Edmund Sargus ruled that the businesses of Buffett were bound by a prior determination requiring them to pay taxes due for per-hour flight fees.

The federal judge ruled prohibiting the IRS from ignoring a guidance issued to a NetJets predecessor in 1992. NetJets is using the guidance to determine the portion of its fractional jet ownership business is subject to federal excise tax.

NetJets’ claim for refund

In 2011, NetJets filed a case against the IRS alleging that the agency made a mistake in assessing the ticket tax, an excise tax imposed on private aircraft owners on payments made in exchange for air transportation. The private aviation company demanded refunds and abatement from the agency. The IRS filed a countersuit four months later.

The private aviation company also lost its claim for a refund of more than $220 million paid by its three business units including accrued interest in the ruling issued by the federal judge.

NetJets was previously considered by Buffett as his “number one worry” as it never paid dividend to owners. Most recently, the private aviation company is facing a labor dispute.

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