Wren Alexander Investments, L.L.C. v. IRS (In re Wren Alexander Investments, L.L.C.)

Wren Alexander Investments, L.L.C. v. Internal Revenue Service (In re: Wren Alexander Investments, L.L.C.), Case No. 12-50376 (5th Cir. June 4, 2013)
Affirmed lower courts' allowance of the IRS' claim against the debtor based upon a pre-petition lien on real property that the debtor aquired on the eve of bankruptcy from a delinquent third-party taxpayer. The court did not resolve the question of the debtor's right to challenge the lien, which attached to the subject property after the debtor purchased the property, because the court found that that the debtor failed to offer any evidence to rebut the presumption in favor of claim allowance. The Court also found that the debtor was not a good faith transferee of the property, becuase the debtor was an insider of the transferor(s) and was aware of the transferor(s) insolvency at the time of sale.
Procedural context:
Appeal from the United States District Court for the Western District of Texas. The IRS filed a secured proof of claim against the debtor's estate for the full amount of unpaid taxes owed by the third-party property seller, claiming that the property secured the debt. The debtor objected to the validity of the lien and the underlying tax assessment. When the debtor was unable to present evidence sufficient to challenge the claim, the bankrutpcy court allowed the IRS's claim, which then attached to proceeds from the debtor's post-petition sale of the subject property.
Wren Alexander Investments LLC ("Wren" or the "Debtor") was formed for the purpose of acquiring a 551-acre tract of real property in Texas (the "Property") from Medina Heritage, Ltd. ("Medina") in exchange for $2.275M. Less than three years earlier, Medina had purchased the Property from United Capital Investment Group, Inc. ("UCIG") in exchange for Medina's assumption of $2M in debt attached to the Property. At the time of the sale to Medina, UCIG was insolvent and owed the IRS approximately $173M in unpaid taxes. The principals of UCIG, Medina and Wren were frequent business partners and the Property transfers between them were not made in exchange for market value. After Wren's acquisition of the Property, and six months before Wren filed bankruptcy, the IRS filed an "Alter Ego, Nominee or Transfer" lien against the Property. The IRS filed a proof of claim in Wren's bankruptcy for more than $173M, which was the total amount of taxes owed by UCIG and its related companies, and the IRS asserted that the Property was security for the entire claim amount based upon the pre-petition tax liens.

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