Nortel Networks and the U.S. Internal Revenue Service need to begin preparing for a trial scheduled to start in two weeks over a $3 billion tax bill the U.S. government sent the bankrupt vendor at the end of August.
At a hearing Wednesday, U.S. bankruptcy court judge Kevin Gross said that Nortel and the IRS need to meet tomorrow to go over any information the two sides need for the Oct. 13 trial. Gross is the U.S. judge overseeing Nortel's bankruptcy proceedings. Nortel filed for bankruptcy in January.
The IRS sent Nortel in August a $3 billion claim in back taxes, interest and other penalties as Nortel was in the midst of unwinding and selling off some of its main businesses. In fact, the move caused Nortel to change its $915 million sale contract to Avaya for the company's enterprise solutions division. The sale of Nortel's assets will be applied against more than $10 billion in claims from creditors around the world. If the IRS claims go through, it will mean that creditors will get less money on the dollar for their claims, and could also wipe out claims from U.S. creditors, suppliers and employees who are owed severance pay.
Nortel argued that the timing of the claim could indicate that the IRS was acting in bad faith. The government, for its part, said the claim was legitimate and also said that the issues were too complicated to have a trial start so soon.
For more:
- see this Bloomberg article
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