ELDER-BEERMAN WINS IN COURT IN IRS DISPUTE
NEW YORK — A bankruptcy court has ruled that Elder-Beerman Corp., which has been in bankruptcy proceedings since October 1995, does not have to pay taxes on $15 million the Internal Revenue Service claimed was income from construction allowances from shopping center owners.
The IRS originally claimed that Elder-Beerman, based in Dayton, Ohio, got $35 million in taxable income in construction allowances, but that was subsequently reduced to $15 million.
“This ruling is very beneficial to the company and creditors in our Chapter 11 case,” said Fred Mershad, president and chief executive officer. “It removes a large potential liability and will allow all parties to our case to concentrate on reaching a settlement that excludes that issue.”
The firm is aiming to emerge from bankruptcy this summer. The retailer also noted that the institutional creditors’ committee is opposing on appeal the retailer’s six-month extension of the time when the debtor exclusively can file a reorganization plan. Creditors had objected to the extension because equity holders are looking for payments under a reorganization plan plus veto power over the composition of Beerman’s new board. Creditors are contending that equity stakes are worthless.