1031 Tax Group to borrow $142M to repay customers

1031 Tax Group LLC, a trust that holds proceeds from property sales for clients, said Stillwater Capital Partners Inc. agreed to loan it $142 million to help pay customers who lost money when it went bankrupt.

Details of 1031 Tax’s deal with Stillwater, a New York-based hedge fund, were presented to U.S. Bankruptcy Judge Martin Glenn at a hearing last Tuesday in Manhattan, according to court filings. The company revealed the accord last month, without giving details.

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The loan will be arranged by JPS Capital Partners LLC and secured by properties held by 1031 Tax Chief Executive Officer Edward Okun, according to court documents. If approved, Richmond, Va.-based 1031 Tax will add the funds to around $20 million it holds and use the money to settle contracts valued at $151 million, Norman Kinel, the company’s lawyer, said in the court papers.

“The Okun entities will essentially pledge all of their assets to JPS to secure the Okun loan,” Kinel said in a filing. Okun holds property through Investment Properties of America LLC.

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The proposed deal is part of a plan for reorganization that must be approved by Glenn. Around 300 customers paid 1031 Tax to temporarily hold proceeds from real estate sales in order to defer taxable capital gains while they found similar properties to buy.

The company’s Chapter 11 filing in May listed assets of $154.6 million.

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