Court Rejects Nicholas Claim on Tax ShelterTuesday, September 25, 2012
A tax-shelter claim by Broadcom Corp. co-founder Henry Nicholas for hundreds of millions of dollars in losses was rejected by a federal district court judge last week, according to a report by Forbes.
The tax shelter was expected to save Nicholas about $78 million in taxes, according to the government.
The summary judgment ruling by Judge David Carter of the Central District of California said Nicholas’ claims lacked “genuine issue” of fact for a full trial.
The ruling will be appealed, according to Nicholas’ attorney, Jeffrey Paravano, managing partner of Baker & Hostetler LLP in Washington, D.C.
The case goes back to Nicholas’ 2001 purchase of about $300 million worth of nonperforming Chinese and Korean loans in what the Internal Revenue Service has dubbed a “distressed asset/debt” or “DAD” shelter. Nicholas paid $6.2 million for the debt through MyCFO Inc., a wealth management firm launched in 1999 by Netscape founder Jim Clark. Assets of MyCFO were sold to Chicago-based Harris Private Bank in 2002 amid scrutiny by the IRS.
Nicholas is the eighth-wealthiest resident of Orange County, with a net worth of $1.5 billion, according to the Business Journal’s estimate in its annual OC’s Wealthiest special issue, published in August. Forbes estimated Nicholas’ net worth at $1.3 billion in this month’s Forbes 400, which ranked him No. 347 in the U.S.