The bankrupt estate of FTX has made a bold move to challenge the United States Internal Revenue Service (IRS), seeking court approval to reduce a $24 billion claim against it to zero.
According to FTX, this move is crucial to prevent the IRS claims from derailing the progression of its bankruptcy proceedings.
FTX Seeks to Nullify IRS’s $24 Billion Claim
Earlier this year, the IRS imposed a massive tax bill on FTX and its associated Alameda groups of companies, amounting to approximately $44 billion, prioritizing the claims of customers who suffered financial losses due to the exchange’s collapse.
The IRS’s claims included two substantial amounts: a $20.4 billion and a $7.9 billion claim against Alameda Research LLC. These figures stem from allegations of unpaid partnership taxes, amounting to about $20 billion, and millions in unmet income and payroll tax obligations.
Despite the initial claim, the IRS revised its demand, scaling it to $24 billion. However, in its November 29 filing, FTX contests this revised figure, describing it as grounded in “mere speculation and conjecture.”
The firm highlighted that the IRS has not provided a clear basis for these estimates, as the agency’s audit teams have reportedly been unable to justify the calculations or share them with the debtors.
FTX Challenges IRS’s $24 Billion Claim
FTX’s argument against the IRS claim is based on the assertion that the amount is hugely inflated. The firm argues that the $24 billion claim is more than fifty times its total earnings, hundreds of times more than any plausible tax obligation, and several times the total value available for distribution to its creditors.
Adding to the complexity, FTX revealed that the IRS had dismissed tax returns prepared by Ernst & Young LLP, a respected accounting firm, on the grounds of insufficient substantiation. This rejection raises questions about the IRS’s assessment methods and the validity of its claims.
The insolvent exchange also expressed concerns that resolving the IRS claims could span multiple years, potentially leading to a lengthy legal battle that would hinder the progress of its bankruptcy proceedings.
FTX advocates for the court to estimate the IRS claims at $0.00 to avoid such delays and ensure timely distributions to its customers and creditors. The firm asserts that such a move is crucial to prevent the IRS claims from derailing the progression of its bankruptcy proceedings.
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