Hilton Seeks Reversal of 2 IRS Rulings on Estate

Barron Hilton, chairman and chief executive of Hilton Hotels, asked the U.S. District Court in Los Angeles on Tuesday to throw out two Internal Revenue Service rulings in a dispute over his father’s $400-million estate.

The rulings have helped to block the son’s acquisition of a controlling share of the hotel firm’s stock. The IRS findings helped pave the way for the 27.4% block to be held by the Conrad N. Hilton Foundation, set up by Barron’s father to benefit charity.

As previously reported, the IRS last February ruled to reclassify the foundation as a “support organization” with its list of 169 public charities as possible recipients of gifts.

A companion ruling allowed the support organization to transfer about half of the hotel stock to a newly created private foundation to escape a regulation limiting holdings to 20% of a corporation’s stock.

Barron Hilton’s suit alleged that the IRS in its rulings sought to help the foundation defeat an option that he received in his father’s will to purchase the 6.7 million shares. He sought to exercise the option shortly after his father’s death in January, 1979.

Los Angeles County Superior Court Judge Robert I. Weil ruled last April that the foundation, as a support organization, has the right to the stock under Conrad Hilton’s will, which bequeathed most of his stock to charity. Both sides, however, had predicted that the ruling would not end the legal battle.

Barron Hilton’s attorney, Ronald E. Gother, said Tuesday that “even though Barron Hilton plans to leave the value of the stock to the foundation by his will,” the foundation had decided “under pressure from” the California attorney general “that it would not wait.”

Instead, he said, it adopted “a variety of schemes designed to defeat and destroy Barron Hilton’s legitimate option,” including transforming itself into a support organization.

In the lawsuit filed Tuesday, Barron Hilton alleged a number of IRS “errors” in making its two rulings. Among them was expanding the number of acceptable public charities permitted in a support organization.

Another was permitting the support organization to make gifts to a private foundation.

Gother said it was important for a federal court to determine the validity of the IRS rulings.