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In this proceeding, the Full Court of the Federal Court considered three main issues:

  • whether certain on-lending arrangements gave rise to legitimate tax deductions for interest;
  • duties and liabilities of directors who were not directly involved in the impugned transactions; and
  • costs payable by a representative where claims were brought against the estate of a deceased director and the representative of that estate, in his own right.

Facts

Pension issues in the American Airlines (AMR) bankruptcy1 have resulted in the Internal Revenue Service (IRS) issuing new final regulations, effective November 8, 2012 (Final Regulations), which broadly impact all debtors facing underfunded pension plan obligations. The Final Regulations provide chapter 11 bankruptcy debtors facing distress terminations of their tax-qualified defined benefit pension plans with the additional option of amending the plans to eliminate accelerated payment options.