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A three-judge panel said in a per curiam decision that Indu Rawat’s gain was from the sale of a partnership interest, not a gain from the sale of inventory, and therefore was exempt from federal taxes. The IRS had argued that Rawat’s gains should be treated as income from selling inventory.
The decision means that Rawat is entitled to a refund of $2.9 million in taxes and penalties she paid on gains from the sale of her 29% interest in a partnership, Innovation Ventures LLC, that owned a company that sold 5-Hour Energy drinks.
The case was reported by Law 360. Ross LLP attorney Nathan Hochman told Law 360 that Rawat’s victory followed a five-year legal battle.
“In a very thorough decision, Chief Judge Srinivasan of the D.C. Circuit reversed the Tax Court, which had errantly adopted the IRS’s arguments that contradicted the statutory language of the tax provisions involved,” Mr. Hochman said. “Ms. Rawat is very appreciative of the D.C. Circuit’s full vindication of her position and looks forward to receiving her long-requested refund.”
Rawat was represented by Hochman of Ross LLP and Christopher S. Rizek of Holland & Knight LLP.
The case is Rawat v. Commissioner, case number 23-1142, in the U.S. Court of Appeals for the District of Columbia Circuit.
Stuart Pfeifer
LAG Strategy Corp
+1 (310) 415-6955
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