By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian financial institution is a defendant in a lawsuit demanding that a “bankrupt” client return trust assets domiciled in this nation to settle almost $28m in unpaid US federal income taxes.

Equity Bank & Trust only appears to have been named because it is trustee of the Kroner Family Trust 2004 and Kroner Family 2007 Trust Settlement B - the two trusts settled with a combined $18m by Burt Kroner, who is now being targeted with litigation by the Internal Revenue Service (IRS) over his alleged tax debt.

There is nothing to suggest that Equity Bank & Trust, its directors, management or employees have violated any laws, or done anything wrong, in relation to the Kroner case. However, legal documents dated from last week and seen by Tribune Business show the US government is preparing to serve the Bahamian institution with a summons and notice of the proceedings.

And the action against Mr Kroner also alleges that Equity Bank & Trust only began informing the IRS, as part of its reporting obligations, that its client was the 2007 Trust’s settlor after he lost his challenge to the tax claim against him in June 2020 in the US tax court. The 2007 Trust had originally been settled that same year, albeit with another person named as its settlor.

The US government, in its July 10, 2025, claim against Mr Kroner alleged that the two trusts were settled using the proceeds from $25m “in cash transfers” that he received from a ‘Mr Haring’ between 2005-2007. He had been advised that these did not attract US federal income taxes, but did not fully disclose all necessary information to the attorney who made that determination.

As a result, the IRS found Mr Kroner had “under-stated his income” and associated due taxes. US tax court hearings found some $12.675m had been placed into the 2004 Trust via a series of transactions between February 4, 2005, and December 20, 2006, while another $5m was transferred to the 2007 trust in 2007 for a combined total of $17.765m.

The US courts found Mr Kroner “liable for the tax on the income he transferred to The Bahamas’ trusts” and associated penalties, but he “has refused or neglected to pay all the assessed income taxes, penalties and interest, and statutory interest, that continues to accrue since assessment”.

“As of July 7, 2025, Mr Kroner owes the United States the sum of $27.8m plus statutory penalties and interest that continues to accrue until paid,” the IRS alleged. It has initiated its claim in the south Florida federal district court now after the same district’s bankruptcy court ruled that The Bahamas trusts and their assets are not subject to the automatic stay imposed by Mr Kroner’s Chapter 11 bankruptcy.

“On December 30, 2024, Mr Kroner elected to exclude the Bahamas trusts from the bankruptcy estate. The exclusion meant that the Bahamas trusts were not property of the bankruptcy estate and not subject to the automatic stay,” the US government asserted.

“On July 10, 2025, the bankruptcy court issued an agreed order granting the United States’ motion to lift the automatic stay.... The order states that the Bahamas trusts are excluded from the bankruptcy estate and that the United States was entitled to file this suit against Mr Kroner to repatriate assets held by the Bahamas trusts.”

Noting that the trusts and their assets were transferred to The Bahamas in 2014, the US said there was nothing preventing Equity Bank & Trust from “distributing the full balance of the 2004 Trust directly to Mr Kroner” even though his children are named as beneficiaries as well as himself.

As for the 2007 Trust, while this initially listed Mr Haring as the settlor, this position was later assumed by Mr Kroner who reports himself as such in IRS filings. “Each year, Equity is required to report the settlor of offshore trusts to the IRS. Before the tax court decision in 2020, Equity did not report Mr Kroner as the settlor of the 2007 Trust,” the US government alleged.

“But after the tax court held that the $5m Mr Haring transferred to the 2007 Trust was in fact Mr Kroner’s income, Equity began reporting Mr Kroner as the settlor of the 2007 Trust. Mr Kroner now files annual returns for the 2007 Trust as the settlor. The 2007 Trust was settled in The Bahamas, and the 2007 Trust documents say that the 2007 Trust is governed by Bahamas law. But Florida law applies to the 2007 Trust.”

The IRS has had repatriation of the Bahamian trust assets, as a means to settle the unpaid US federal income tax debt, in its sights for some months. It argued in June 9, 2025, filings with the south Florida federal bankruptcy court that Mr Kroner was drawing on the trust assets to fund his “lavish lifestyle” and that this means of recovery was becoming seriously depleted.

“During this bankruptcy, Mr Kroner has failed to provide adequate protection,” the US government alleged. “Instead, he receives large monthly distributions from the Bahamas Trusts to fund his lavish lifestyle and, in the meantime, the IRS is paid nothing.

“Because Mr. Kroner excluded the Bahamas Trusts from the estate, and he has failed to provide adequate protection to the IRS, the court should grant the United States’ relief from the automatic stay.... Mr Kroner’s tax documents show that he is rapidly depleting the value of the Bahamas Trusts.

“Before Mr Kroner filed for Chapter 11 protection in 2023, the 2022 year-end cash value of the Bahamas Trusts was $11.7m. And that was after receiving nearly $1m in cash distributions in 2022. The year-end cash value decreased to $10.9m by the end of 2023,” the US government continued.

“While Mr. Kroner has not filed tax returns for the Bahamas Trusts for the 2024 tax year, he has disclosed his monthly distributions through his monthly operating reports. Since the end of 2023, Mr Kroner has disclosed an additional $1.3m in distributions.

“So, Mr Kroner has depleted the value of the Bahamas Trusts by at least $2m since filing for bankruptcy while shielding those distributions from collection by the IRS. That rapid depletion of the Bahamas Trusts demands immediate action by the United States to preserve our interests.”