Zuckerman’s Tax Bill Disputed in Court Battle

Mortimer B. Zuckerman, the nationally prominent real estate magnate who owns U.S. News & World Report magazine, has paid no federal income tax for the past five years by claiming tens of millions of dollars in what his lawyer calls “paper losses” from his various business ventures, according to recent court testimony here.

Portions of Zuckerman’s personal tax returns, along with numerous other details about his business practices, have emerged in recent weeks during the course of an unusually fierce and protracted legal dispute growing out of Zuckerman’s 1980 purchase of the Atlantic Monthly magazine.

Zuckerman’s lawyers, who bitterly fought to exclude the tax returns from the case, have contended that his lack of income-tax liability between 1981 and 1986 reflects routine practice in the real estate business--the result of depreciation and interest writeoffs on property he owns.

Zuckerman, ranked by Forbes magazine among the 400 wealthiest Americans with an estimated net worth of $250 million, recently testified here that he has accumulated more than $100 million in real estate tax losses over the past few years--more than enough to wipe out his personal tax obligations for the foreseeable future.

The tax returns and court testimony have shown that, while Zuckerman’s business has flourished, allowing him to become a major force in the magazine-publishing world, his tax losses have ballooned: From an “adjusted net loss” of $12.4 million on his 1982 tax return, to $49 million in losses on his 1985 return, according to testimony last week by John A. Foppiano, a Price Waterhouse partner and tax specialist who reviewed Zuckerman’s tax returns as a consultant for the former owners of the Atlantic who are suing Zuckerman.

Efforts to obtain Zuckerman’s comments for this article were unsuccessful. His personal assistant, Clare Probert, said Zuckerman was aware of the subject matter, but was on vacation and could not be reached for comment.

One apparent sign of Zuckerman’s current financial health was his 1984 purchase of U.S. News for $163 million, a deal that industry sources say has yielded Zuckerman even more tax benefits.

The tax returns have filtered into the case because of claims by five former owners of the Atlantic that Zuckerman bought the financially ailing magazine, at least in part, for the tax writeoffs.

The former owners, led by an elderly New Yorker named Marion Campbell, whose family had long owned the magazine, filed suit against Zuckerman for breach of contract after the developer refused to pay about $2.7 million of the negotiated $3.6 million purchase price.

What has surprised many observers is the tenacity of both sides. The original breach of contract suit was filed in the spring of 1980 when Zuckerman did not make the first of three $900,000 installments due the former owners.

Zuckerman countersued shortly thereafter and the case has been bogged down in legal maneuvering ever since, including six years of discovery, depositions and delays. The legal skirmishes culminated in a hard-fought trial that began March 16 and dragged on until last Thursday.

After hearing instructions from U.S. Judge David Nelson, the jury will begin deliberations today.