Widow of Mel Simon sues government to recoup $21.4M

The widow of Mel Simon is suing the U.S. government over a tax dispute in which she claims she is owed a refund of more than $20 million related to financial contributions he made to the Indiana Pacers totaling $83 million.

Bren Simon, whose late husband co-founded Simon Property Group Inc. and co-owned the Pacers with his brother Herb Simon, filed suit Monday in a federal court in Colorado.

The shopping mall heiress now resides in Carbondale, Colorado, a town of about 6,500 in the western part of the state.

In her lawsuit, Bren Simon alleges that her late husband began pouring money into the team to help keep it afloat following a now-infamous fight involving players and spectators that occurred during a game with the Detroit Pistons in November 2004.

“Beginning with the ‘brawl’ and continuing with a series of player arrests and other incidents occurring between 2005 and 2008, the Pacers became a civic and family embarrassment and lost significant fan support,” Bren’s suit says.

The financial condition of the team became so severe, she alleges, that Mel approached Herb about selling the team.

Mel, as it turned out, couldn’t force a sale of the Pacers. As an alternative, the two began discussing a restructuring of Pacers ownership whereby Mel would be relieved of the burden of funding ongoing losses while permitting Herb to continue to operate the team.

They ultimately came to an agreement. But Mel died in September 2009, after providing a total of $83 million to the Pacers, the suit says.

The Internal Revenue Service viewed the financial support as a gift, billing Bren for a portion of the amount in 2013. She paid a gift tax of nearly $21.4 million in May 2014, under protest, and submitted a refund claim.

The IRS denied her request, prompting the lawsuit. Bren claims no gift occurred because “the reorganization was made in the ordinary course of business, bona fide, and free of any donative intent.”

Bren’s suit comes after Simon family members in December 2012 settled a three-year legal battle over how to distribute Mel's $3 billion fortune. His children, Deborah Simon, Cynthia Simon-Skjodt and David Simon, fought to invalidate changes to Mel's will that increased the share going to their stepmother, Bren. Terms of the settlement were not disclosed.

Bren’s Carmel residence, a 106-acre spread known as Asherwood, is on the market with an asking price of $25 million.