JP McManus loses $5.2m US tax case over backgammon game

Limerick racehorse owner and gambler JP McManus has lost a US legal action to recover $5.2 million (€4.9 million) in tax withheld from his winnings on a three-day backgammon match.

The Washington DC-based US court of federal claims rejected his claim for a refund on the money deducted from $17.4 million in gambling proceeds won from American billionaire Alec Gores in what Mr McManus's lawyers called a "serious" match involving the board game in California in 2012.

Judge Nancy Firestone denied the Irish businessman's request to direct the Internal Revenue Service to hand over the funds that Mr Gores, an Israeli-born investor who made his fortune on technology companies, withheld and paid to the taxman to cover potential income tax liabilities.

Mr McManus's Texas-based lawyer Terry Giles said that they were disappointed by the ruling and that he planned to talk to the Limerick businessman and his Irish solicitors to determine whether to appeal to the US court of appeals, one court below the supreme court, the country's highest court.

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“Obviously it is a delicate issue and everything needs to be reviewed. We have a while . . . before we have to appeal. Everything will be taken into consideration,” he said.

Redacted judgment

The reasons for Judge Firestone’s decision are not publicly available as her judgment was sealed by the court after being entered on Friday. A redacted judgment will be published at a later date.

Mr McManus had claimed that he was exempt from American income tax under the US-Ireland double taxation treaty because in 2012 he paid the €200,000 domicile levy, the Irish Government's charge for Irish-domiciled individuals with substantial worldwide income and Irish property.

The US government argued that Mr McManus, a tax resident of Switzerland, could not benefit from the 1997 treaty because he was not a resident of Ireland for tax purposes in 2012.

During a lively court hearing in October, Mr Giles claimed that the Revenue Commissioners assisted the IRS with their defence of Mr McManus’s action because he was “not the most favourite guy in their Revenue department” as he was “a very wealthy guy” and paid no Irish tax between 1995 and 2010.

The judge ordered the sides to agree to a sealed “protective order” withholding the identity of the Irish tax official who sent a letter helping the IRS.