By JERRY MOSKAL
Heirs to the Western Dental Services Inc. estate are battling the Internal Revenue Service over a $14.1 million tax bill.
The family of the late Robert F. Beauchamp, former owner of the 140-office Western Dental Centers chain, filed a petition asking the U.S. Tax Court in Washington, D.C., to overturn an IRS demand for the extra taxes.
The case involves Beauchamp’s wife, Dorothy Beauchamp, and trusts controlled by her before her death in 2000 at age 83. Her heirs argue tax authorities overvalued the trusts in assessing more taxes.
The family also claims the IRS made a mistake when it raised the taxable value of Dorothy Beauchamp’s estate by $16.9 million because of denied deductions and an increase in the assessed value of her stake in an investment.
“I really don’t have a comment,” said David J. Duez, a Chicago tax attorney for the family.
David T. Beauchamp, executor of his mother’s estate, didn’t return calls for comment.
An IRS spokesman said the agency is barred from talking about pending tax cases. The IRS has 60 days to file an answer to the Jan. 5 petitions filed by the family.
If the IRS and estate fail to settle, the case could go to trial before a tax court judge.
Beauchamp’s husband, who died in 1998, took over Western Dental in the 1930s from his father, Curtis, who founded it in 1903. The son expanded the chain in California and Arizona and branched into real estate development.
The company’s strategy was to offer affordable dentistry, which helped Beau-champ become known as the “credit dentist.”
He also created a real estate company called Beauchamp Enterprises.
The dental business hit some choppy times in the late 1990s.
In 1998, Orange-based Western Dental hired Samuel H. Gruenbaum as chief executive after Robert Beauchamp died. Gruenbaum had represented the dental chain in its $1.7 million settlement of state charges that its medical care was shoddy.
Besides Western Dental’s 140 offices, the dental health maintenance organization employs more than 450 dentists, orthodontists and specialists. It also has 1,500 affiliated dentists in 800 offices in California.
Robert Beauchamp relied on newspaper, radio, TV and billboard advertising to grow the company.
Dorothy Beauchamp earned a reputation in Orange County for philanthropic work. She worked with the Orangewood Children’s Home and St. Andrew’s Presbyterian Church in Newport Beach, among others.
Beauchamp and her family were among the first to settle Balboa Island in Newport Beach. The island had just a handful of homes when the family started spending summers there after World War I.
The petition for her estate said after Dorothy Beauchamp’s husband died, the trustee for the mutual Beauchamp Trust Agreement divided his assets into three trusts.
The family’s petition said one trust benefiting Dorothy Beauchamp held a 41% stake in a note that the IRS ruled had an $8.49 million taxable value.
The IRS determined her estate couldn’t deduct a $3.9 million note payable by the trust to DB Holdings, and that $4.5 million in interest owed by the Beauchamp Trust to the Midlands Co. couldn’t be written off.
In addition, the family’s petition complained that the IRS failed to allow the estate additional deductions for the cost of running the estate, including the legal costs of filing the petition appealing the IRS ruling and one filed last year in a gift tax case.
Besides the petition appealing the IRS demand for $14 million in added taxes, the estate filed a second petition appealing an order to pay $36,600 more in 1999 gift taxes.
The gift tax petition argued the IRS erroneously found that the 0.12% interest in a $42.1 million note given to each of her children,Robert F. Jr., Richard L. and David T. Beauchamp, and daughters, Beverly Grimstad and Dorothy Beauchamp Riechers,was worth more than $24,000.
The IRS notice of deficiency, as the demand for added taxes is known, found the estate should have reported a $33.9 million taxable value, instead of the $9 million reported on the estate tax return.
Moskal is a Washington, D.C.-area freelance writer covering U.S. Tax Court.
