Brazil Distressed Debt Sale Can’t Sustain $23 Million Tax Loss

The IRS properly denied a partnership’s deduction claim based on a $22.7 million loss from its sale of distressed Brazilian receivables, the Second Circuit said Monday.

“The Tax Court did not err in concluding that the facts and circumstances here did not rebut the presumption of a disguised sale,” states the US Court of Appeals for the Second Circuit’s opinion, indicting the close timing in the structure of the sale of distressed trade receivables “was not mere coincidence.”

Investment advisory firm Gramercy Advisors LLC formed several tiers of partnerships with Brazilian metal products supplier Santa Bárbara Indústria e Comércio ...