W.R. Grace joint venture capital loss cut to $32.15 million under IRS agreement

By Caroline Salls

Pittsburgh, Jan. 22 - W.R. Grace & Co. has reached an agreement with the Internal Revenue Service that will reduce the company's capital loss from a 1999 transaction to $32.15 million from $128.6 million, according to a Friday filing with the U.S. Bankruptcy Court for the District of Delaware.

The 75% capital loss difference will be disallowed, according to the motion.

The company claimed the $128.6 million capital loss on its 1999 federal income tax return in connection with the formation of a special purpose environmental management joint venture called Remedium Group, Inc.

The other party to the joint venture was de maximis, Inc., an environmental project management company.

According to the motion, the formation of the joint venture resulted in the recapitalization of a W.R. Grace subsidiary, a transfer of some legacy liabilities, the assignment of a partial interest in a subsidiary's promissory note to fund the remediation of the legacy liabilities and the sale of 1,223 shares of Grace-Conn. common stock to de maximis, which resulted in a $128.6 million capital loss.

W.R. Grace said the IRS challenged the federal tax consequences of the joint venture transactions.

A hearing is scheduled for Feb. 25.

W.R. Grace, a Columbia, Md.-based specialty chemicals company, filed for bankruptcy on April 2, 2001. Its Chapter 11 case number is 01-01139.

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