Hale's back-tax bill $1.8 million, IRS says

March 02, 1993|By David Conn | David Conn,Staff Writer

An article yesterday in The Sun about IRS tax claims agains Edwin F. Hale Sr. carried incorrect figures about Mr. Hale's claimed income in 1989 and 1990 in an accompanying table. Mr. Hale says he lost $128,386 in 1989 and $753,602 in 1990.

The Sun regrets the errors.

Baltimore businessman Edwin F. Hale Sr. significantly understated his income from 1988 through 1990 and now owes almost $2 million in back taxes, interest and penalties, according to the Internal Revenue Service.

Mr. Hale, the owner of trucking and barge companies and the former owner of the defunct Baltimore Blast soccer team, filed a petition with the U.S. Tax Court last month challenging the IRS's claim that the $11,682 he paid in taxes during the three years fell short by $1,159,543, not including an additional $645,437 in penalties and interest.

FOR THE RECORD - CORRECTION

Mr. Hale also is chairman of Baltimore Bancorp, the parent of the Bank of Baltimore. But his dispute with the IRS "has nothing to do with the bank," he said yesterday, and only involves the years before he joined the company in 1991. The IRS action against Mr. Hale was reported last week in The Baltimore Business Journal.

The income and losses in question came from Mr. Hale's ownership of several trucking and shipping companies, including Port East Transfer Inc., Hale Container Lines Inc., Larkin Equipment Corp. and Atlantic North Star Inc. He also is a partner in the Baltimore Port Truck Plaza and was majority owner of the Baltimore Blast soccer team until its demise, along with the Major Indoor Soccer League, last year.

The gap between Mr. Hale and the IRS is striking. In 1989, for instance, Mr. Hale paid $7,081 on what he claimed was $24,361 in taxable income.

The government says he earned $502,865 that year, and owes $135,451 more in taxes, not including penalties and interest.

The next year, in which Mr. Hale said he lost $128,386, he still paid $4,136 in taxes, although neither Mr. Hale nor his attorney could explain why yesterday. The IRS, by contrast, says Mr. Hale earned $2.76 million and owes an additional $769,520 in taxes.

The IRS also claims Mr. Hale owes about $189,000 in additional taxes for 1987, according to Max H. Lauten, Mr. Hale's attorney, who said that case is awaiting a trial date.

At the heart of the dispute is the question of whether money Mr. Hale's companies paid him should be classified as loans, which are not taxable, or dividends, which are. The issue "arises frequently when an individual owns all or substantially all of a company," said Mr. Lauten.

Mr. Lauten said the loans were made at roughly market rate, and that a "substantial" amount of the loan balances have been repaid.

There were also questions about movements of money between Mr. Hale's companies.

If the U.S. Tax Court ultimately agrees with the IRS that some of those transfers were payments rather than loans, that would affect the companies' profits, and therefore the taxes Mr. Hale would owe.

Another point of contention is whether Mr. Hale's use of a company yacht and airplane were for personal reasons, and therefore taxable, or strictly for business reasons. And the IRS disallowed a $115,000 deduction on a loan Mr. Hale said he made in 1990 to the Baltimore Blast Corp.

"I've got close to $3 million in actual dollars lost during the time I [owned] the team," Mr. Hale said. "I am going to exercise my right to go to court over this."

Mr. Lauten said the IRS has 60 days to respond to Mr. Hale's Feb. 4 filing. "There will most likely be some discussions" about settling the case in the meantime, he said.

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