Buyers of seven summer camps owned by SIMAD Holdings Ltd. do not have to withhold tax under the rules for sales of U.S. property by foreign owners, according to a New Jersey bankruptcy judge’s ruling reported by Law360 on October 5, 2026. The judge overruled an IRS objection in the company’s Chapter 11 case. The ruling is specific to that proceeding; the available reporting does not establish the judge’s reasoning or a broader change to FIRPTA.
What the bankruptcy judge decided
In case 3:26-bk-16388, the court determined that buyers of seven summer camps owned by SIMAD Holdings Ltd. need not withhold taxes under rules governing sales of U.S. property by foreign owners. Law360 reported the outcome on October 5, 2026, describing it as a New Jersey bankruptcy judge’s decision overruling an IRS objection. SIMAD filed for Chapter 11 on June 4, 2026, according to the report and the case index.
The case is in the U.S. Bankruptcy Court for the District of New Jersey, Trenton, and is assigned to Chief Judge Christine M. Gravelle, according to the docket index. That index lists a debtor emergency motion seeking a determination of withholding obligations under FIRPTA, an IRS response, and a debtor reply.
Why did the IRS lose the withholding dispute?
The available report states the outcome, but does not explain the court’s legal reasoning. The docket index identifies the filings but does not provide the ruling’s analysis. Without the order and underlying papers, it is not possible to say what legal or transaction-specific facts led the judge to overrule the IRS.
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How FIRPTA withholding generally works
FIRPTA authorizes U.S. tax on foreign persons’ dispositions of U.S. real property interests. The IRS says that, in most cases, the buyer (transferee) is the withholding agent and may be liable if required withholding is not made. IRS guidance gives a general withholding rate of 15%, while noting that special rules and exceptions apply: IRS FIRPTA withholding guidance.
That general rule explains why buyers can face withholding obligations when purchasing U.S. real property from a foreign owner. It does not establish which rules or exceptions applied to the camp sales, or why the bankruptcy judge concluded that these buyers did not have to withhold.
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What the ruling does—and does not—establish
- Established by the report: the judge ruled that the buyers of seven SIMAD-owned summer camps need not withhold tax under the relevant foreign-owner property-sale rules, and overruled an IRS objection.
- Not established by the available sources: the identities of the camps and buyers, the precise sale structure, the order’s full scope, the court’s reasoning, or whether the ruling was appealed.
- Not a general rule change: the reported decision concerns a specific Chapter 11 proceeding. It should not be treated as a blanket exemption from FIRPTA withholding in other transactions.
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