Pabst Owner Seeks $200K Tax Refund; Claims Shares Have “Zero Book Value”
The 2005 990-PF for the Kalmanovitz Charitable Foundation was received by the Internal Revenue Service on May 15th, and a footnote to the tax return asks for a $216,578 refund from the government for overpayment of taxes. The firm will take $206,578 in cash, thank you, with the balance to be credited to 2006 taxes, if any.
According to the $59 million California foundation, which owns the virtual brewer Pabst, and dozens of other brands, “Since before 2000, the Company has suffered significant operating losses in one of its subsidiaries … and by the end of FY 2005, there were no current or accumulated ‘earnings and profits’ (CAEP).”
During the course of the year, according to a financial footnote, the company made significant distributions to the foundation, which the foundation recorded as dividends.
“However,” the footnote blithely states, “a subsequent investigation revealed the lack of CAEP and therefore the distributions were not ‘dividends,’ but rather a non-taxable return of capital, reducing the net tax basis in the shares of the Company owned by the Foundation (but not reducing the ‘net unrelated income’ of the Company.) … Although the book value of the shares is now zero (it cannot be negative), there still remains a positive ‘adjusted tax basis’ and therefore no capital gain has arisen from the FY 2005 distributions. Because of the foregoing, there was a substantial overpayment of tax, most of which is requested to be refunded.”
The foundation acquired 100 per cent of S&P, the Kalmanovitz holding company, in July 2000. Previously the shares had been held in the estates of Paul and Lydia Kalmanovitz, and had been valued at over $300 million at the time of the transfer, at which point the shares were then declared to be worth only $2 million dollars, leading to an IRS suit. [See Milwaukeeworld’s July 2006 posting, “Who Really Owns Pabst (An Uncharitable Foundation.)”—Ed.] [Click here for a link to the foundation’s tax returns from 2001 – 2006—Ed.]
Although the shares of S&P stock have no book value according to the accountants, they are claimed to be worth $50,000,000 on the open market, a sum that is quite likely absurdly low.
So it appears as if the shenanigans of the Kalmanovitz trustees show no sign of abating, although they did kindly provide nearly $6 million in grants last year to selected charities largely associated with its three trustees. They are Rev. John LoSchiavo, nb president; Bernard Orsi, and Lou Girardo, who was elected in November 2005 and has replaced Conrad Hewitt, who had been named chief accountant for the Securities and Exchange Commission last August. [This seems like a case of a wolf being the watchdog.]
There is precious little information on Girardo, other than he appears to be a San Francisco “businessman and attorney,” according to the San Francisco Bay Guardian, which had speculated he might be a mayoral candidate there this year. However, a milwaukeeworld search could not find any listing of Girardo as an attorney anywhere.
How did the shares come to be valueless for Book Value purposes? The foundation paid $85,360 to an outfit called Moore Consulting for “valuation of non-traded shares.” That’s one way to do it!