Bad Tax Advice Costs Omega’s Cooperman Millions

Aug 11 2010 | 10:14am ET

Omega Advisors founder Leon Cooperman said he was “mortified” when he received a $19 million tax bill that he claims was the result of bad tax advice.

Cooperman, who seeded hedge fund Jana Partners in exchange for a share of its fee income, turned over that stake to his charity, the Leon and Toby Cooperman Family Foundation, in 2001 and 2006. Each time, he had the future income streams professionally appraised, the first half at $15 million and the second at $28 million.

The only problem, as Cooperman concedes, is that you’re not allowed to deduct non-publicly-traded securities donated to your own foundation. He likely would not know that—and would not be on the hook for almost $20 million—if he hadn’t had his first Jana appraisal redone in 2006, after the second appraisal found the other half of the stake to be worth nearly twice as much.

Armed with a new $20 million appraisal from RSM Business Services, Cooperman filed an amended tax return in 2005. In return, he got the tax bill—for $15 million in unpaid taxes and $4 million in fines.

While Cooperman is formally disputing the whole of the bill, his lawyer told Forbes he’s hoping that the penalties will be waived. Richard Levine notes that Cooperman relied on tax professionals and should not be penalized for their mistakes.

Whether Cooperman’s tax preparer, Gittelman & Co., or RSM will be penalized remains to be seen. The billionaire will wait until the tax case runs its course before considering his legal options against them.


In Depth

Q&A: Fund Administration Comes To The Cloud

Jul 14 2017 | 7:23pm ET

The fund administration sector has been steadily implementing new technology, such...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Maglan Capital: Some Lessons Learned From Puerto Rico

Jul 13 2017 | 8:00pm ET

Although Maglan Capital has not been invested in Puerto Rico for more than three...

 

From the current issue of