Mysterious $7B estate tax payment spurs questions about source of funds
A mysterious influx of more than $7 billion in estate tax payments to the Treasury Department early last year spurred a search for the billionaire responsible for the anomalous payment.
The massive payment was first discovered by John Ricco, who is currently the associate director of policy analysis for the Yale Budget Lab. Ricco told FOX Business that the Daily Treasury Statement has shown an average payment of $86 million in estate taxes paid per day since 2019, but by contrast, the record for Feb. 28, 2023, showed $7.075 billion in estate tax receipts – almost 80-times the normal amount.
Based on data going back to 1993, Ricco compiled the top 10 days by estate tax receipts which ranged from $907 billion on April 12, 2024, to the $1.613 billion in estate taxes received on March 8, 2010. He said that Feb. 28, 2023, "was much larger than any previous record."
He also noticed that "almost all of these days are during tax season – days when there is some kind of legal filing deadline, so the IRS is receiving many payments at once. But that's not the case for Feb. 28, 2023, which was just some ordinary day as far as tax rules are concerned. That was a major clue that something strange was going on."
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The odd nature of the payment spurred journalist Tim Fernholz to investigate who might've been responsible for the payment, which he most recently chronicled in an article for Sherwood.
He researched the various publicly known billionaires who passed away within the timeframe that would result in a payment made in Feb. 2023, given that the IRS collects estate taxes nine months after the date of death (which can be extended by six months), but none had estimated wealth totals that would explain the payment.
Fernholz ran into a dead end until a year later, when a financial services professional reached out to him. The source told him they were familiar with a large estate that was publicly undervalued and had timing that aligned with the payment.
The source told Fernholz that the deceased billionaire hadn't sought to avoid the massive estate tax bill and did so out of gratitude for the opportunity the U.S. afforded them as an immigrant. They went on to identify the Treasury's benefactor as the late Fayez Sarofim, who worked in private investments and accumulated a net worth in excess of $20 billion after immigrating to the U.S. from Egypt.
Fernholz later found IRS data pointing to Texas as the source of payment, which is where he had lived and worked. He was unable to confirm Sarofim as the generous billionaire who made the estate tax payment and left open the possibility that a living billionaire made the payments in advance.
FOX Business reached out to Fayez Sarofim & Co. for comment.
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The Treasury Department's Internal Revenue Service is legally forbidden from disclosing information about tax payments, so the IRS is unable to shed light on the identity of the taxpayer who was the source of the payment.
FOX Business spoke with tax professionals and wealth management experts about how unusual it would be for a wealthy estate to leave such a vast sum of money to the government. Karla Dennis, enrolled agent and the CEO and founder of accounting firm KDA, told FOX Business that a $7 billion payment would suggest "the total estate is probably worth more than $17.5 billion" given that the estate tax rate is 40% on amounts over $12.92 million.
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"From my experience, it would be very rare for wealthy individuals to let a big part of their estate go to the government without trying to reduce taxes. Most use legal methods to lower the amount their heirs will be taxed on," Dennis said. "These strategies include setting up trusts, giving away money or assets, making charitable donations, or other financial planning. By doing this, they can greatly reduce the taxable portion of their estate, and the taxes owed."
Justin Rush, a financial advisor at Nemes Rush, told FOX Business, "There are some older stories about 'patriotic' folks who wanted more money to go to the government and set up very inefficient state plans. But for the most part, people are trying to minimize the government getting its hands on any part of their estate, especially those that built businesses, and worked very hard to accumulate what they have."
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"That's nice, I wish more people did that – it would bring our deficit down a little bit," Ken Mahoney, CEO of Mahoney Asset Management, told FOX Business when asked about the large payment. "That doesn't even move the needle, unfortunately," he added in noting the size of the deficit, which topped $1.8 trillion this past year.