News Column

The Idaho Statesman Dan Popkey column

June 28, 2014

By Dan Popkey, The Idaho Statesman



June 28--With the stakes having reached about $500,000, former Rep. Walt Minnick has appealed to the Idaho Supreme Court and the U.S. 9th Circuit Court of Appeals about a disallowed tax deduction in a real estate development.

At issue is whether Minnick and his wife, A.K., were due a deduction of about $1 million for donating a conservation easement to the Land Trust of the Treasure Valley for 60 of their 74 acres developed as the seven-lot Showy Phlox Estates near Hidden Springs. The easement was intended to limit development on those acres in perpetuity.

Now Minnick is six years into the fight. "It's a half-million-dollar issue," he said Thursday, as his attorney filed a final brief with the state Supreme Court. That figure includes taxes, penalties and interest.

"It's expensive, it's drug on and it's non-productive," Minnick said. "But it's material from my standpoint, so I'm going to see it through."

In 2008, the IRS informed the Minnicks that their tax return was being audited. The U.S. Tax Court sided with the IRS in 2012, rejecting the deduction.

Minnick is appealing that decision to the 9th Circuit, where he says his tax lawyer puts his chances at about 50-50.

MALPRACTICE ALLEGATION

That's where the claim against Minnick's law firm of more than 25 years, Hawley Troxell Ennis & Hawley, comes in.

The IRS disallowed the deduction because the Minnicks failed to file documents preserving the easement.

Minnick alleges negligence on the part of the firm and lawyer Geoff Wardle for failing to file a subordination agreement. (Wardle left Hawley Troxell in 2013 and now is general counsel at Gardner and Co.)

Minnick's claim against Hawley Troxell was halted in October when 4th District Judge Ron Wilper granted the Boise firm summary judgment. Wilper ruled that the two-year statute of limitations had expired by the time the Minnicks sued in June 2012.

Wilper awarded Hawley Troxell $50,000 in attorney's fees. The Minnicks have appealed the summary judgment and fees to the state's high court. Briefs have been filed by both sides, with the Thursday filing by Minnick lawyer Bill Mauk expected to be the final paperwork before any oral arguments.

The Minnicks argue that Wilper erred in tossing the case, saying they didn't learn from the IRS that the lack of a subordination agreement was the core issue until June 2010 -- giving them until June 2012 to sue, a deadline they met.

Wilper held that the clock began ticking in June 2009 when the Minnicks hired another lawyer, tax expert Tim Tarter. Or, at the latest, in July 2009, Wilper wrote, when the IRS disallowed the deduction.

"Since Plaintiffs retained new counsel to resolve their dispute with the IRS on June 1, 2009, and since Plaintiffs were specifically notified on July 9, 2009, why the deduction would be disallowed, the Court finds that the Plaintiffs incurred actual damages proximately caused by the Defendants' alleged malpractice no later than July 9, 2009," Wilper wrote.

"That means there was no time that we could have filed (the malpractice action)," Minnick countered. "That's just not the way American jurisprudence works."

NO HARD FEELINGS

The Minnicks are asking the Idaho Supreme Court to return the case to a trial judge.

John Janis, representing Hawley Troxell, filed a brief May 23 arguing that Judge Wilper got it right in dismissing the case, adding that the firm "vigorously" denies the allegations of negligence.

"We continue to believe that Mr. Minnick was provided excellent legal service by this firm and that the firm was not negligent in any respect," Steve Berenter, managing partner at Hawley Troxell, told the Statesman.

Minnick, now a lobbyist who splits his time between Washington, D.C., and Boise, reported his net worth at between $2.5 million and $11 million in his 2010 personal financial disclosure to the House.

He said the malpractice lawsuit is simply a business decision.

"I have many, many friends at the firm and I have the highest respect for the firm," Minnick said.

He called the failure to file the subordination agreement with U.S. Bank an unintentional, though costly, oversight. The agreement was filed by Hawley Troxell in September 2011, but that was too late for the Minnicks' 2006, '07 and '08 deductions, said the IRS and Tax Court.

Minnick said that if he wins his federal appeal, the malpractice case will be moot.

"I'm basically arguing the malpractice didn't matter, that the deduction should have been allowed," he said.

Dan Popkey: 377-6438, Twitter: @IDS_politics

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(c)2014 The Idaho Statesman (Boise, Idaho)

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Source: Idaho Statesman (Boise)


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