Irish racehorse owner wants USD 5.2M tax refund from US

McManus is asking the U.S. for more than USD 5.2M that he says was wrongfully withheld from gambling winnings of USD 17.4M to cover taxes, according to a complaint filed on Monday in the U.S. Court of Federal Claims. 

McManus alleges that a withholding agent erroneously withheld the money and the Internal Revenue Service has agreed to refund it but has been dragging its feet, according to the complaint. McManus is exempt from tax on the winnings under a U.S.-Ireland tax agreement, the complaint said.

“Plaintiff respectfully requests that plaintiff be awarded judgment against defendant in the amount of $5,220,000.00 U.S., prejudgment and post-judgment interest and the highest allowable rate, court costs, attorneys' fees and such other and further relief to which plaintiff may be entitled,” the complaint said.

According to the complaint, McManus filed a nonresident alien income tax return for the year 2012 and requested a refund from the IRS. The refund claim was approved in 2014, but it was then routed to another department at the IRS and the agency has taken no further action since then, the complaint said.

The McManus complaint came after the owners of former U.S. Olympic team horse Flim Flam hit the Internal Revenue Service with a suit in the Court of Federal Claims earlier this month aiming to recover nearly $7.9 million in federal income tax overpayments.

Fritz Rudolf and Claudine Kundrun said in their complaint that the IRS owes millions for overpayments made during tax years 2007 to 2009. The Kundruns' award-winning horse Flim Flam, a Hanoverian gelding that died in 2004, helped the U.S. team nab a bronze medal at the 2000 Sydney Olympic Games.

“The Kundruns pray that the requirements for satisfaction of a refund claim of $7,890,901, or such greater amount as is properly refundable, be determined and held satisfied, that judgment be entered on the claims asserted,” the complaint said.

The Florida-based couple said in their complaint that the overpayments date back to a 50 percent interest that Mr. Kundrun held in two controlled foreign corporations — AMCI Investments Pty. Ltd. and AMCI International AG — in 2007 and 2008.

An earnings and profits study focused on the years 2000 to 2009 later provided updated and revised financial data for the companies and other entries, but came after the Kundrun’s 2009 tax return, according to the complaint. The study was not available for the pair’s 2007, 2008 and 2009 returns, it noted.

However, the couple noted in their complaint that the IRS has thus far disallowed refund claims for 2007 and 2008, and not yet issued a notice disallowing the pair’s claimed refund for 2009. The Kundruns seek refunds of around $4.6 million for 2007, roughly $2.8 million for 2008 and more than $540,000 for 2009.

In the McManus case, John P. McManus is represented by Mark T. Curry and Terry M. Giles.

Counsel information for the U.S. was not immediately available on Monday.

The case is John P. McManus v. U.S., case number 1:15-cv-00946, in the U.S. Court of Federal Claims.