WASHINGTON — The government's $358-million tax case against the wealthy Hunt family of Dallas opened today with sparring between the Internal Revenue Service and the Hunts' attorneys over records regarding the family's ill-fated silver buyout of 1980.
In a consolidation of eight cases being argued in U.S. Tax Court, the IRS claims that Nelson Bunker Hunt and his wife, Caroline, covered millions of dollars of their children's losses when the silver market crashed in early 1980.
The couple had written off the money as bad loans, but the government contends that the transfers constituted gifts to the Hunt children rather than loans and are taxable.
The IRS in 1985 disallowed $147.6 million claimed as a short-term capital loss by Nelson Bunker and Caroline Hunt on their 270-page 1980 income tax return and is seeking in the neighborhood of $100 million in back taxes from them.
Sitting in the court were Hunt and his wife, who used a plush lamb's wool cushion to ease the pain of sitting through the court proceedings.
The remainder of the taxes sought are charged against the Hunt children and their spouses: Albert and Mary Huddleston, Thomas and Elizabeth Curnes, and Caroline Hunt.
The elder Hunts say in their court filings that they transferred $165.4 million to their children, all in the form of business loans that "became worthless" and were uncollectable.
They say that they lent the money to help the children cover margin calls on silver futures when the price of silver began falling in January, 1980, and that they made the loans because they believed in the long-term value of silver.
The 1980 silver crash resulted in at least a $1.3-billion loss for Bunker Hunt and his brother, Herbert Hunt. The two had bought 59 million ounces of silver, estimated at one-third of the existing world supply.
The Hunt children began investing heavily in silver futures beginning in February, 1979, when the precious metal was trading at $5 an ounce.
Within a year, the price climbed to more than $50 an ounce. During that time, the Hunts and their children used the balance of their paper profits to buy more silver futures, a trading pattern known as "pyramiding."
Eventually, the Hunt children lost all of their margins, and the overall deficits were covered by Bunker Hunt's brokerage, the IRS says.