02 Oct 2017
- By Bryan Manabat – [email protected] – Variety News Staff
THE federal court on Thursday ordered John K. Baldwin, Bridge Capital LLC chief executive officer, to pay over $2 million in federal taxes and penalties incurred from his investment in the Delaware company Claston LLC.
Federal Judge Frances Tydingco-Gatewood said the interest has accrued from July 31, 2013 to Feb. 1, 2015 and from Aug 15, 2006 up to present.
Baldwin was ordered to pay $2,085,902 he owes the Internal Revenue Service, plus 15 percent in penalties totaling $312.885.30.
According to court documents, Baldwin has an ownership interest in Claston LLC, Sunset Holdings, LLC and Fulham LLC, all of which are treated as partnerships for tax purposes.
Claston was originally comprised of two partners, Fulham and Hatteras Capital Management LLC. Fulham held 99 percent interest in Claston, and Hatteras held the remaining 1 percent in Sunset Holdings which was designated as the tax matters partner.
According to court documents, the IRS in Dec. 2005 audited the 2002 tax returns for Claston on grounds that it was a tax shelter and the losses reported should be disallowed.
During the same period, Baldwin’s 2002 tax returns were audited in relationship to the IRS’s audit of other tax returns involving Claston.
The IRS sent Baldwin a notice of deficiency claiming that he owed $5,131,076 and $1,026,215 in penalties resulting from the disallowance of loss claimed by Claston, which totaled $5,603,892.
Baldwin and Claston, through their counsels Deborah Deitsch-Perez and Michael Dotts had asked the court to rule that the correct amount of based, pre-interest tax dollars that resulted from the disallowance of the 2002 Claston loss was $1,904,790.
The lawyers also asked the court to rule that the interest only accumulated on this amount from the date of the return until Feb. 1, 2005, or in the alternative, from the date of the return until Feb. 1, 2005, and again from July 18, 2008 until payment.
The court ruling resolved two issues: the amount of tax that flows through Claston to Baldwin and will be deducted from his tax refund; and when interest accrued on the unpaid taxes.
Judge Tydingco-Gatewood said the IRS concluded that Baldwin’s income exclusive of the Claston-related taxes exceeded $307,050, and therefore all taxes resulting from the disallowed Claston loss were subject to a 38.6 percent tax rate.
Because Baldwin and Claston have failed to demonstrate that the IRS erred in calculating Baldwin’s income or other tax obligations, Baldwin and Claston have failed to rebut the presumption of correctness as to the IRS’s application of the 38.6 tax rate, the judge added.
Source: Marianas Variety : http://www.mvariety.com/cnmi/cnmi-news/local/98966-bridge-capital-ceo-ordered-to-pay-over-2m