July 29, 2009

ANSWERS TO “FREQUENTLY ASKED QUESTIONS” FROM VICTIMS, CREDITORS AND OTHER INTERESTED PARTIES OF THE 1031 TAXGROUP, ET AL CASES:

1.    What is the status of any tax loss that I might incur because of the events relative to the funds that were being held by the 1031 Tax Group, LLC or its affiliates?

ANSWER: Like most tax related issues, there are no easy answers and this matter is to be discussed with your tax advisors.  For example, the nature of your loss may be affected by your status as a taxpayer (for example, individual, corporation, etc.), the nature of your other income and other personal factors.  For this reason, it would be advisable to visit with your tax professionals as to the nature and timing of any deductions for losses incurred.

2.    What is the best way to contact the Trustee?

ANSWER: Via e-mail.  Please the Contact Us link to the left.

3.    Why were proofs of claims in the 1031 Tax Group cases filed electronically on the Court’s CM/ECF system by the Trustee when these were filed earlier in the case with KCC?

ANSWER: We have discontinued KCC’s services as we cannot afford them at this time in the case.  Thus, as directed, we transferred all claims filed from the KCC database to the court system to generate a claims register for these cases.  If multiple filings of claims were made or filings were made with even slightly different changes in names or addresses you will continue to receive multiple notices until formal removal of any duplicative claims is handled through appropriate objections to claims.  We filed our first objection to duplicative claims, and are finalizing additional omnibus objections to duplicative claims.

NOTE: If you have previously filed a claim with KCC, there is NO need to re-file your claims.

4.    What is the status of the IPofA Debtors’ chapter 11 cases?

ANSWER:    In December of 2008, an Order was entered dismissing the chapter 11 cases of 100 Corporate Drive LLC, Case No. 07-13626, and CW Acquisition LLC, Case No. 07-13628, and in May of 2009, an Order was entered dismissing the chapter 11 cases of IPofA 5201 Lender LLC, Case No. 07-13622, IPofA Columbus Works LeaseCo LLC, Case No. 07-13623, IPofA West 86th Street LeaseCo LLC, Case No. 07-13625, Simone Condo I LLC, Case No. 07-13629, and Simone Condo II LLC, Case No. 07-13630, Parkway Virginia Trust, Case No. 07-13798, and Columbus Works Virginia Trust, Case No. 07-13799.  I sought dismissal of the IPofA Debtors’ chapter 11 cases because, based on my investigation, I concluded that most of the real estate, and interests in real estate, owned by the IPofA Debtors were highly leveraged, and no equity remained for the benefit of the IPofA Debtors or their creditors, including the 1031 Debtors’ chapter 11 estates.  The motion seeking authorization to dismiss the chapter 11 cases of Investment Properties of America, LLC, Case No. 07-13621, and Crossroads Miami Logistics Center LLC, Case No. 07-13627, is pending.  Upon entry of an Order dismissing Investment Properties of America, LLC’s chapter 11 case, the chapter 11 case of IPofA Shreveport Industrial Park, LLC will be administered under Case No. 07-13624-mg.

5.    Can we expect a distribution any time soon and what we may expect in terms of distribution?

ANSWER: Our work to date has revealed that the values of Okun’s assets as transferred under the Transfer Agreement dated October 11, 2007 were nowhere near what they were represented to have been worth.  Unfortunately, any distribution will have to be dependent upon recoveries from lawsuits and insurance.  There is also the possibility of funds from potential gas deposits from the Shreveport real estate.  These recoveries are difficult to predict, both in terms of amount and time-frame.  However, I do believe that there will be a distribution to general unsecured creditors.

The first amended plan (“Plan”) and first amended disclosure statement (the “Disclosure Statement”) were filed with the court on July 10, 2009.  The Disclosure Statement has not as yet been approved by the Court, and a hearing to consider approval of the Disclosure Statement is currently scheduled for August 13, 2009 at 10:00 a.m.  Until the Disclosure Statement is approved by the Bankruptcy Court, it may not be used or relied upon to solicit acceptance or rejection of the plan.  We have reached a number of significant settlements with third parties that will fund the plan.  The amounts of those settlements are set forth in the Disclosure Statement; copies of the proposed Disclosure Statement and Plan are available here:

First Amended Disclosure Statement (pdf)

First Amended Ch. 11 Plan of Reorganization (pdf)

The settlements are subject to approval by the Bankruptcy Court and the Court for the Class Action pending in the Northern District of California.  We reached an agreement with the Class, which has been approved by the Bankruptcy Court.  Under the terms of the arrangement, Class Action counsel will continue to represent class-action plaintiffs (which would include all of the exchanger-creditors assuming that the class is certified), thereby ensuring that the benefits of any settlement or litigation recovery will be received by the exchanger-creditors regardless of whether received under the bankruptcy action or under the class-action litigation. Under the terms of the agreement, generally the Class Action counsel will receive compensation based on their regular hourly rates for obtaining approval of the class action court for settlements already reached or nearly reached, and will be entitled to enhanced compensation, subject to strict limitations and court approval, with respect to with claims against Wachovia and Lockton and other claims we may pursue jointly.  The Agreement provides for the sharing of certain litigation proceeds between the 1031 Debtors’ estates and the Class.  The Agreement is a crucial component of our strategy to effect the largest possible recoveries, and to assist in the plan confirmation process.  One of the benefits of this agreement is the “belt and suspenders" protection for the exchanger-creditors in that certain defenses which might be raised against the Trustee will not be available against the class action plaintiffs and likewise, certain defenses potentially available to the defendants in the class-action litigation are not available to be raised in the Trustee's actions.