You asked: Manor trustee sale better than IRS seizure

Published 10:47 am Tuesday, September 15, 2015

Q: Had the IRS seized The Manor, wouldn’t the outcome have been the same in terms of the substitute trustee sale?

The Manor Golf Course was in local news again in May when a lone bid at a substitute trustee’s sale secured the 18-hole course for $600,000. Would the outcome have been the same had the property been seized to satisfy an IRS tax lien? The general consensus is “no.”

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The Manor, originally conceived by the Poplar Hill Community Development Authority (CDA), was promoted as “the new standard for golf in South Central Virginia.” The Manor, in fact, was chosen as one of the “Best New Golf Courses of 2007 by “Golf Digest” magazine. 

Despite its promising future, The

Manor was in financial difficulty by 2011, and an IRS lien on the property seemed imminent

“The IRS lien was based on withholding tax for employees not being paid,” Prince Edward County Industrial Development Authority (IDA) Director Sharon Carney said.

“The IRS goes after withholding tax very seriously,” local CPA Ben Johnson said. “When an entity withholds money from someone’s paycheck, they literally are taking money from the employees and theoretically should be holding that in escrow and turning around and paying it to the IRS. The fiduciary relationship is pierced when they (entity) don’t pay that to the IRS.”

In 2011 the Prince Edward IDA approved a $50,000 unsecured loan to the Manor Golf Course to keep the struggling course in operation until it could be sold at auction. The IDA, according to Carney, did exactly what it was designed to do.

The loan from the IDA, Carney noted, went directly to the trustees who sent the money to the IRS.

“It never went into the owners’ hands,” she said.

The IDA strongly felt that the golf course operation had the potential to be an economic tourism asset.

Carney noted that the IDA works with businesses all the time. 

“Sometimes that includes a restructure, sometimes it’s equipment loans or to help build something,” she said. “We worked with Hampden-Sydney to build a library, and we worked with the hospital when they added a wing.”

The IDA’s goal with The Manor, Carney added, was to keep the golf course in operation.

“If a golf course, like a building, is shut down it goes to ruin quickly,” she said. “The auction did not occur until this year, and the IDA loan was done in 2011, so the golf course would have deteriorated and might possibly never have been able to come back.”

In addition, the IRS could, and in all probability would, have seized The Manor to satisfy a withholding tax lien.

“The IRS will seize property and sell it to pay back these taxes because they are taken from the employees’ paychecks,” Johnson said.

“It could have been seized, and that’s what we didn’t want to happen,” Carney said.

Johnson noted that an IRS seizure is not “an overnight thing.”

“It can take years for them to go through the proper channels to actually obtain title to the property,” he said. “They literally shut the property down. Ultimately it would have been sold at a lesser amount of money, and some deterioration would have occurred.”

Would the outcome, in terms of benefiting the local community, have been the same had the IRS had seized the property?

The answer, according to both Carney and Johnson, is “no.”