KPMG was on the losing side of a $17.6 million verdict in a case involving an investor who claimed the firm gave him bad tax advice.
Philanthropist Gary Bielfeldt said KPMG should have advised him to change his status to "dealer" instead of "trader" when he reported his profits on trades in government securities two decades ago, according to the Peoria Journal Star. As a dealer, he would have been able to carry back his losses. In 1991, he asked the IRS to refund him nearly $90 million in taxes that he would not have needed to pay if he was in fact engaged in dealer activities, but the IRS declined. The IRS prevailed in court and on appeal.
He then sued KPMG in 2000, seeking $61 million in damages. The case was dismissed and then reinstated after Bielfeldt appealed. KPMG's attorneys argued that Bielfeldt could not easily change his status to dealer, but Bielfeldt's attorneys argued his business model would have changed to that of a dealer if KPMG had advised him to do so.
The firm may appeal the verdict. "KPMG believes the verdict is not supported by the evidence and we are studying our options for judicial review," said KPMG spokesman Dan Ginsburg.
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