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CRE Finance World, Winter 2014

The receiver can ultimately use estate funds, either from ongoing operations or sales proceeds, to pay these obligations in either a bulk amount or negotiate a payment plan. Often the receiver can negotiate down any penalties or interest that has been attached to the amounts owed. Ultimately, the option that is chosen will need to be implemented with the receiver’s best business judgment. For example, in the case of a receiver trying to sell a property for $300,000 with an outstanding tax liability of only $2,000, it would make more sense to pay the taxes — versus expending time and money to battle the taxing authority and return to court over the issue. It could easily take four to ten hours of receivership time – which is a sizeable sum, with no guarantee that the tax liability will be abated. Indeed, it is often more practical and cost effective to bite the bullet and pay the taxes that are due — especially when the receiver is trying to keep the doors open on an operating business, such as a hotel or a restaurant. The lost revenue and/or the potentially bad public perception and loss of goodwill when customers see the location shut down — even for a short time — can easily do more economic damage to the receivership estate than simply paying past due taxes. CRE Finance World Winter 2014 72 Conclusion Again, often the best option for the receivership estate may be to pay the outstanding tax liability. At other times — depending on the circumstances — the tax is worth fighting. This is the constant battle of the receiver and it is important for the receiver and the court — as well as the borrowers and the lenders — to understand the ever-changing role that taxes can play in the loan recovery process. A receiver must approach tax issues strategically and pragmatically and use their best business judgment, depending on the respective scenario. When the receiver reports back to their court on operations for the past month, she or he should be able to state in good faith that they have worked to their very best ability to preserve the value of the asset. As chief administrative officer for Trigild — a San Diego-based real estate services firm specializing in property and asset management services — Kelley McLaren is responsible for overseeing the firm’s receiver services department. The Tax Man Cometh: Paying Taxes in Receivership


CRE Finance World, Winter 2014
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