WASHINGTON - 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." 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. All told, roughly 30 million policyholders received distributions, Ulrich estimates. Charles Miller, a spokesman for the Justice Department, said the government hasn't yet decided whether to appeal. Still, taxpayers should request refunds if they're eligible, the tax experts said, because even if the IRS rejects the claim, doing so extends the deadline for a potential refund for two more years.