IRS keeping score as Humana Challenge tees off

PGA West
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The buyers and sellers of PGA West face a mountainous obstacle in the form of the Internal Revenue Service.

Series: Golf Buzz

Published: Thursday, January 17, 2013 | 2:00 a.m.

The PGA Tour stop this week is the Humana Challenge, which is being hosted by PGA West and La Quinta Resort & Club, a pair of exclusive golf complexes that dominate the eastern half of the Coachella Valley.

Keeping an eye on the tournament are the prospective new owners of those two properties – the Government of Singapore Investment Corporation's real estate investment arm. Earlier this month, Paulson & Co., a New-York-based hedge fund, sold PGA West and La Quinta Resort & Club, along with several other top-of-the-line golf facilities, to the real estate investment arm of the Singapore government's sovereign wealth fund, according to a story in the Desert Sun newspaper. The purchase price is about $1.5 billion, the paper said.

The proposed deal, however, has caught the attention of the U.S. government. Preet Bharara, the U.S. Attorney for the Southern District of New York, said in court papers that the sale would create $331 million in tax liabilities that ''should be owed'' to the Internal Revenue Service but cannot be collected. The issue, as explained in a story on the Live Trading News web site, is that the purchase documents contain wording that stops the IRS from collecting on the taxes.

''Seeking such an injunction purporting to limit the IRS s ability to pursue any liabilities stemming from the Purchase Agreement is particularly disingenuous given that, at the same time, Debtors concede that 'the law is unclear''' when multiple taxpayers are involved, Bharara told Live Trading News. The sale document concedes that the IRS could win if it goes after the money, the site said, though Bharara argues that a bankruptcy judge doesn't have the authority to decide on tax liabilities for anyone other than the party in bankruptcy.

The sale marks the latest chapter in a tumultuous few years for PGA West and La Quinta R&C. About a year ago, Paulson and the Winthrop Realty Trust seized them, along with several other properties, in a foreclosure proceeding. However, Paulson and Winthrop filed for Chapter 11 bankruptcy protection soon thereafter, according to bankruptcy court documents.

Paulson and Winthrop then missed a debt interest payment, the newspaper said, and that prompted an auction last fall. The Singapore Investment Corp. was the only bidder, and a later auction set for last December was canceled after no one submitted bids by the deadline.

The new Singapore owners also are trying to buy the Arizona Biltmore in Phoenix, the Grand Wailea Resort Hotel & Spa in Hawaii, the Claremont Hotel Club & Spa in Berkeley, Calif., and even the Great White Course at the Doral Golf Resort & Spa in Miami. Donald Trump bought Doral from Paulson last year, and is working on a major renovation.

Spokespeople for Paulson and the golf properties have declined to comment on the sale, but one thing is clear: Following the financial scoreboard for this deal could be just as compelling as tracking the scores of your favorite players at the Humana Challenge.