BILLINGS, Mont. (AP) — Montana's bid to force ultra-luxury resort founder Tim Blixseth into bankruptcy and make him come up with up $57 million in purported back taxes has been resurrected by an appeals court ruling in the case.
A three-judge panel of the 9th U.S. Circuit Court of Appeals overruled a lower court Monday and said Nevada is the proper venue for the case.
Blixseth, a one-time billionaire who lives in Washington state, is believed to have most of his assets in a Nevada-based trust.
On Tuesday, he promised an appeal.
The appellate ruling comes after a Dec. 5 order that Blixseth pay $41 million to creditors from the Yellowstone Club, the private ski resort he founded near Big Sky.
Beginning in 2005, Blixseth diverted most of a $375 million loan to the club to himself and then-wife Edra Blixseth. They used the money to buy up luxury estates around the world, a pair of jets, cars, furniture, art and jewelry.
When the resort started to founder, Tim Blixseth turned it over to Edra Blixseth during their 2008 divorce and took most of their remaining assets. The Yellowstone Club went bankrupt months later. It was later sold and is now under new ownership.
Montana tax authorities contend the money Blixseth got out of the 2005 loan, from banking giant Credit Suisse, was taxable. They've tried for more than two years to get him to pay up. A separate proceeding to get the money is pending before the Montana Tax Appeals Board.
The Nevada bankruptcy case immediately concerns only a fraction of Montana's tax bill — $219,000. But if the state prevails in the case and Blixseth does not pay all he owes, a bankruptcy trustee could be appointed to liquidate his assets in the trust and satisfy Montana's claim.
"The key to the kingdom is Montana wants to be able to break up this Nevada trust," said Anthony Sabino, a law professor at St. John's University in New York and practicing bankruptcy attorney.
Tim Blixseth counters that the state's claim is politically motivated by his detractors and the Internal Revenue Service ruled the loan was legitimate after a two-year audit.
Montana Department of Revenue Director Dan Bucks said the case has no political connections and his agency is simply pursuing taxes Montana is owed.
Forbes once pegged Tim Blixseth's net worth at $1.3 billion. Court documents more recently put the figure at roughly $230 million.
Attorneys for him argued before the appellate panel that Nevada was the wrong setting for the case because he does not live or have a business there.
Appellate panel Judge Jim Pappas wrote that Blixseth's claim was "disingenuous" given that he put his assets into the Nevada trust to take advantage of state laws that would shield him from creditors.
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