US tax authorities continue to fight legendary Irish horseracing figure JP McManus over a multimillion dollar backgammon wager.
In court papers filed this week, US federal attorneys claim that the argument made by McManus’ attorneys that their client isn’t subject to US withholding tax on gambling winnings “bends the law beyond breaking point.”
In 2012, McManus squared off against private equity billionaire Alec Gores in a three-day “serious” backgammon match in California. When the dust cleared, McManus had won $17.4m off the hedge fund boss. However, Gores held on to $5.2m of this bounty based on his belief that the proceeds were subject to US federal income tax.
Last September, McManus filed a claim in US federal court arguing that a 1997 tax treaty between the US and his native Ireland exempted his winnings from the clutches of the US Internal Revenue Service. McManus’ attorneys claimed that, for tax purposes, their client was an Irish resident in 2012 and thus only responsible for paying a flat tax of €200k.
In February, the feds countered that McManus wasn’t an Irish resident in 2012, supporting this claim by pointing out that McManus failed to file an Irish tax return for that year.
On Wednesday, the US attorneys filed papers with the court arguing that McManus was in fact a tax resident of Switzerland in 2012 and had avoided paying Irish income tax “by spending significant time outside” the country. As such, the IRS believes McManus doesn’t qualify for “resident of a contracting state” under the US-Irish treaty.
The filing also reveals that McManus was quizzed by US attorneys regarding details of the fabled three-day backgammon tilt. McManus’ memory proved hazy on questions of who may have observed the match, but he did note that “the amounts to be wagered were altered during the competition at the request of the losing party.”
McManus is one of the richest Irishmen on the planet, with an estimated net worth of over $800m, so it seems he could well afford to walk away from this fight. But some of his friends told the Daily Beast earlier this year that McManus won’t let the issue die because he “started with basically nothing. His fortune stems from a £4 bet made when he was 20.”