IRS seeks $6.5 million from Duke lacrosse settlement

Staff WritersFebruary 25, 2011 

— The Internal Revenue Service has filed a $6.5 million tax lien against Reade Seligmann for 2007, the same year the former Duke lacrosse player settled with the university over its handling of rape allegations against him and two other players.

But a Charlotte lawyer who represented Seligmann during the criminal proceedings said that his client paid the tax and that the lien is incorrect.

"It was a substantial amount of tax," said attorney Jim Cooney, who confirmed the taxes were on his client's settlement money.

Seligmann got no notice of the tax lien and found out about it only recently when The Detroit News found the lien and wrote about it, Cooney said.

The dollar value of the settlement has never been made public, and Cooney would not disclose a figure.

But $6.5 million represents taxes on approximately $18 million, according to Raleigh tax lawyer Jack Cummings.

If Duke made identical settlements with former players Colin Finnerty and Dave Evans, the total payment may have topped $50 million.

"You've got enough zeros there that somebody has bound to have thought about it and decided that they didn't owe any tax," Cummings said. There are tax exemptions for some financial settlements, though probably not this type, he explained.

Michael Schoenfeld, Duke's vice president for public affairs and government relations, declined to comment.

New York accountant David Weiss, listed on the lien document, did not respond to a phone call Thursday afternoon.

Cummings said tax law requires payment on damages for emotional distress, based on a change in 1996.

"That's right in the statute," Cummings said. "The word 'physical' was added in there ... because of exactly this sort of thing. People were claiming it was not income."

Cummings said even if physical injury arises from emotional distress, as in the case of a stomach ulcer, for example, settlement money would still be taxable. Even for settlements meant to cover lost earnings in the future, Cummings said the IRS expects to be paid taxes.

jesse.deconto@newsobserver.com or 919-932-8760

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