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If the Internal Revenue Service thought billionaire investor Warren Buffett would quietly accept an assessment of $16.3 million in back taxes and interest, it was wrong. The oracle of Omaha and his investment outfit, Berkshire Hathaway Inc., have sued the United States after the IRS hit the firm with a bill for improperly deducting dividends on two tax returns. According to the company’s complaint, filed by former parent OBH Inc. in federal court in Omaha in August, the IRS claims that Berkshire used $750 million in loans to buy stock in companies. Berkshire then allegedly deducted the dividends it got from the stock and also deducted the interest on the loans. Such double-dipping is illegal under the rules of the tax code, according to the IRS. Using the same language as the IRS statute, Berkshire claims that the borrowed money is not “directly attributable” to the purchase of the securities because it was placed in a general bank account with other funds and was not specifically earmarked for buying the stocks and bonds at issue. The complaint says that the IRS ruling threatens Buffett’s ability to keep lots of cash on hand in order to make profitable investments. For plaintiff OBH Inc. (Omaha) Munger, Tolles & Olson (Los Angeles): Litigation: Dennis Brown, Kelly Klaus, and Ronald Olson. Tax: Robert Johnson and associate Todd Molz. Munger is Berkshire’s regular outside counsel. Fraser Stryker Meusey Olson Boyer & Bloch (Omaha): Litigation: Joseph Meusey and Robert Rossiter, Jr. Tax: Kenneth Sharp. For defendant United States (Washington, D.C.) U.S. Department of Justice (Washington, D.C.): Chief of the civil trial section for the central U.S. Robert Watkins and senior trial attorney Robert Metcalfe. OUTLOOK The government’s answer was due at press time.

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