Lehman Brothers Holdings Capital Trust V (LHHMQ)

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Lehman Brothers Settling More Of Its Tax Issues With The IRS


By Joseph Checkler
Of DOW JONES DAILY BANKRUPTCY REVIEW

Lehman Brothers Holdings Inc. (LEHMQ) said is continuing to work with the Internal Revenue Service to settle issues over back taxes, pacts that will save the estate more money as it plans to pay back its creditors.
In a Thursday morning filing with U.S. Bankruptcy Court in Manhattan, Lehman said it has settled all but 10 of the 36 outstanding issues it had with the IRS over taxes from 2001 to 2007.
"Given the uncertain legal questions and the factual complexity surrounding many of the settled issues, and the risks and expense attendant to litigating each of these settled issues, LBHI believes that the Settlements are fair and reasonable," Lehman said in its filing.
The latest compromise, Lehman said, cuts a $1.8 billion tax claim to $1.1 billion, and the two sides will continue talks on the other 10 issues related to the seven years in question.
"LBHI's management and its in-house tax department have assessed the Settlements and have concluded that the Settlements are fair, equitable, and in the best interest of the Debtors," Lehman said in its filing.
Lehman also said that it continues to negotiate settlements on tax issues for other years with the IRS. A spokeswoman for the U.S. Justice Department, which represents the IRS, declined to comment.
In 2010, Lehman announced deals with the IRS over taxes from 1997 to 2008 that put more than $125 million in the coffers of the firm's bankruptcy estate.
Lehman collapsed into the largest bankruptcy in history in September 2008, and since then, a team of bankruptcy professionals under the direction of Alvarez & Marsal Inc. has managed its assets, including real-estate holdings, corporate debt and derivatives.
Late last year, Judge James Peck of U.S. Bankruptcy Court in Manhattan approved Lehman's creditor-payback plan, which should distribute about $65 billion and treats creditors of Lehman subsidiaries better than those of the parent company.
Despite confirmation of the plan, the company still has billions of dollars in real estate and other assets and will continue to exist as it unloads and manages those investments.
While Lehman's plan has been confirmed by Peck, it still isn't considered "effective," so the distributions can't yet begin. The company has said it hopes to make its first payout to creditors around the end of the first quarter.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)