Quote:
Originally Posted by Mr.Kris
Wish I could explain it, but I'm a spectator like the rest of the residents and all I have is an opinion, not professional advice. And all I have been asking for is others informed opinion.
My personal opinion is: (1) The IRS has a compelling position and it does not appear the IRS will let this go. (2) If the IRS prevails, see opinion number 1, someone will have to pay and that someone, and amount, has not been determined yet, only the issue of taxable/tax exempt has been addressed so far. (3) Everyone is in the mix for liability regarding taxes on these bonds, i.e. the holders of the bonds, the issuer/developer, and the residents. It appears to be a spider web of responsibilities. (4) I will live long enough that the results may, see opinion number 3, affect me. Remember, I said this is my personal opinion. I'm along for the ride like everyone else. And "what a long strange trip it's been."
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I can understand your opinion that the issuer and holders of the bonds might have an obligation were the tax court to rule in favor of the IRS. But the residents? Their only role is as obligors to repay the bonds. Why would they be at risk?
The other party that may be at the most significant risk is the law firm or law firms who issued the legal opinions at the time of each bond issuance that each specific issuance was tax exempt. Both the issuer (the Developer and the CCD's) and the buyers of the bonds relied on that legal opinion. The law firm almost certainly contracted with a bonding company to insure the risk created by their issuance of an opinion. Even if they didn't, most law firms are organized as partnerships or limited liability corporations for the specific purpose of limiting liabilities such as this. So even if a ruling favored the IRS, the first party in line to assume the costs of a reversal of the tax exemption would be the law firm and their bonding company, then the issuer, then the holder of the bonds. And like I said, I can't see how the residents are at risk at all.
But one thing is for certain--even if a ruling favors the IRS, there will be additional years of litigation over who will actually pay any resulting unpaid taxes.