EMC founder’s son not sure he’ll fight tax-shelter ruling
A member of the Egan family said he was disappointed by a federal court ruling that one of EMC Corp.’s founders used an illegal tax shelter to avoid paying millions of dollars in taxes, but he was not sure it is worth the time and expense to appeal.
“We’ll have to review it,’’ said Michael Egan, a son of the late Richard J. Egan who managed the family’s investment firm when the tax shelter was established. “It may be just throwing good money after bad.’’
Richard Egan, who died in August, had already paid the Internal Revenue Service $62 million in disputed taxes and penalties related to the tax shelter, but sued in US District Court in Boston in 2005, seeking a refund.
The Egans later asked the court to void another $13 million in taxes and penalties.
“It was important to my father at the time,’’ said Michael Egan, adding that he was disappointed by news coverage of the dispute that suggested his father was a tax cheat.
“We paid the tax. This was essentially a request to get our money back.’’
According to court documents, Richard Egan and his wife, Maureen Egan, employed a complicated tax shelter to reduce their capital gains taxes in 2001 and 2002 on the sale of more than $300 million in EMC stock.
EMC is a Hopkinton-based data storage giant that Egan helped to launch in 1979 with his college roommate, Roger Marino.
Egan also served as US ambassador to Ireland in 2001 and 2002.
But the IRS in 2000 banned tax shelters similar to the type the Egans used. The accounting firm KPMG, which prepared the Egans’ returns, later agreed to pay $456 million to avoid criminal prosecution for helping its clients use phony tax shelters to avoid taxes.
In a 357-page decision, issued Monday, US District Judge Dennis Saylor wrote that it is legitimate to try to minimize one’s taxes, such as by buying a home to take advantage of the deduction for mortgage interest. But Saylor wrote that taxpayers can take that idea only so far.
“A taxpayer cannot undertake phony or meaningless transactions and claim a tax advantage,’’ Saylor wrote. “He cannot, for example, lend money to himself, pay ‘interest’ on the loan, and claim the interest deduction.
“If the tax laws permitted such a result, they would be nonsensical, and anyone who paid taxes would be a fool.’’
The lawsuit also turned out to be more involved than the Egans expected. The case, which was tried in late 2008, took five years, involved 44 days in court, 3,700 exhibits, and multiple witnesses.
Like many other wealthy families, the Egans said they relied on the advice of professional advisers.
“We received bad advice,’’ Michael Egan said.
Todd Wallack can be reached at twallack@globe.com. 
