Daughters Deny Ownership in Partnerships Set Up by Father

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By Erin McManus

May 17 — The daughters of the co-founder of a software company claim they were never the beneficial owners of partnerships set up to limit tax liability from the sale of the company.

Nicole M. Mollison, Gail C. Vento and Renee S. Vento filed petitions with the U.S. Tax Court on May 2 to challenge deficiencies of about $5.4 million each and penalties of $1.4 million each based on the Internal Revenue Service's determination that each sister received long-term capital gain income of $28.1 million from the 2001 sale of their father's company, Objective Systems Integrators Inc. (OSI).

Lost Residency Ruling

The IRS issued deficiency notices to the sisters following lengthy litigation in the U.S. District Court of the Virgin Islands and subsequent appeals. The U.S. Court of Appeals for the Third Circuit eventually ruled that Richard G. Vento and his wife were bona fide residents of the U.S. Virgin Islands at the end of 2001, entitling them to substantial tax benefits but that their daughters weren't residents and weren't entitled to the tax benefits (76 DTR K-1, 4/19/13).

In their petitions, the Vento sisters said that their father and his advisers formed three limited liability companies, each named for one of the sisters, without the involvement or consent of the sisters.

No Knowledge of Partnerships

The Vento sisters argue that they:

  •  didn't knowingly consent to the transfer of OSI stock into their respective LLCs;
  •  didn't receive any distributions from the LLCs in 2001, with the possible exception of a distribution arranged for the payment of taxes;
  •  with limited exception, weren't involved with or aware of transactions or investments involving the LLCs; and
  •  didn't believe they had any authority to make decisions with respect to the LLCs.


The sisters also maintain that:

  •  their parents and accountants prepared and arranged for the filing of their federal income tax returns;
  •  they had no personal knowledge or understanding of the items reported on the returns;
  •  they never received contemporaneous copies of Forms K-1 issued with respect to the LLCs; and
  •  their parents declined to provide them with basic information concerning the assets for the LLCs.


According to the petitions, the sisters weren't aware of the IRS audits of the LLCs prior to the issuance of Final Partnership Administrative Adjustments in 2008. The sisters concluded that they weren't bona fide partners in the LLCs, and weren't parties to and lacked standing to participate or intervene in, the partnership-level proceedings litigated by their father in federal court.

Latham & Watkins LLP represents the Vento sisters.

To contact the reporter on this story: Erin McManus in Washington at emcmanus@bna.com

To contact the editor responsible for this story: Brett Ferguson at bferguson@bna.com

For More Information

Text of the petitions are at http://src.bna.com/e4e.