FTX seeks court approval to slash US IRS’s $24B claim to zero

The bankrupt FTX estate wants to set the United States Internal Revenue Service (IRS) $24 billion claims against it to $0.00, according to a Nov. 29 court filing.

Earlier in the year, the federal agency had slapped a tax bill worth around $44 billion on FTX and Alameda groups of companies, prioritizing its claims over customers who lost funds to the exchange collapse.

While the IRS has since substantially reduced its claim against the bankrupt firm to $24 billion, FTX stated that the authority’s new claims “reflect mere speculation and conjecture” as the agency has been unable to explain how it arrived at this estimate.

“The IRS Audit Teams have been unable to support or explain any of the estimates comprising the IRS Claims and declined to share any calculations with the Debtors.”

According to the firm, the IRS’s $24 billion claim is more than fifty times what it has ever earned, hundreds of times more than what could plausibly be owed, and several times greater than the total distributable value currently available to creditors.

“These unsubstantiated ‘placeholder’ claims grossly speculate as to the Debtors’ theoretical prepetition tax liabilities and bear no relation to reality,” FTX wrote.

The firm further pointed out that the IRS had rejected the tax returns that Ernst & Young LLP, a leading accounting firm, had prepared for it because the returns were not adequately “substantiated.”

The insolvent exchange highlighted concerns that the IRS might spend multiple years attempting to resolve its claims, which could result in a prolonged legal dispute that would significantly impede the progress of its bankruptcy proceedings.

FTX aims to avoid this scenario by asking the court to nullify the IRS claims. This action is intended to prevent prolonged delays, ensuring timely distributions to the exchange’s customers and creditors with approved claims.

It said:

“To prevent the IRS Claims from completely subverting the Debtors’ progression of these Chapter 11 Cases, the Debtors respectfully request that this Court establish a schedule and procedures for estimating the IRS Claims at $0.00, or such other amount to be determined at trial.”