The Internal Revenue Service has been ordered to pay Warren Buffett’s Berkshire Hathaway Inc. more than $23.1 million as a result of a ruling on a tax dispute, according to published reports.
On Friday, Judge Lyle Strom of U.S. District Court in Nebraska ruled against the IRS for not allowing the Omaha-based property-casualty insurance company to take some tax deductions, according to Reuters.
The ruling came after three years of litigation that stemmed from the tax treatment of Berkshire’s purchases of a number of dividend-paying stocks in 1989, 1990, and 1991, according to several reports. The stocks included Coca-Cola Co., Time-Warner Inc., and Wells Fargo & Co.
The case originated with two lawsuits in which Berkshire alleged that the IRS made an “erroneous, wrongful, and illegal” interpretation of the U.S. Tax Code when it denied the deductions, according to the Associated Press, which added that the two lawsuits were combined for trial.
The IRS had turned down the deductions because it claimed that Berkshire used parts of $750 million in borrowings to buy a number of stocks, according to Reuters. The revenue service claimed that Berkshire had overstated its dividends-received deductions, according to the news service.
The AP noted that the IRS based the denial on a tax rule that cut deductions if borrowed money can be directly attributed to investments in dividend-paying stocks. Berkshire borrowed the money several times and put it into a principal bank account, according to the wire service. For its part, Berkshire argued that it used the borrowed money to strengthen its finances, according to Reuters.
The news service reported that Strom said in his opinion that it’s “virtually impossible for the [IRS] to trace debt proceeds and thus assess tax deficienciesÂ against companies like Berkshire who engage in numerous investment transactions.”
An IRS spokesperson told Reuters that the service doesn’t comment on court rulings. The wire service said Berkshire did not immediately return a call seeking comment.