Cardozo Law Review de•novo

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Citibank made front page news for reasons it would rather have avoided when it mistakenly transferred $900 million of its own money to creditors of Revlon. When Citibank discovered the error the next day, it asked (initially politely then less so) for the creditors to return the mistaken payment. Several creditors refused and Citibank was forced to initiate litigation to attempt to get the money returned. This litigation is ongoing, but the first round of the battle was won by the lenders when a federal district court ruled that they had a legal right to retain Citibank’s mistaken payment under the “discharge for value” defense. This Article briefly reviews the facts and the opinion of that case. On appeal, the Second Circuit reversed that decision and held for Citibank thereby requiring the lenders to return Citibank’s money. This piece also reviews that opinion. The primary and original contribution of the piece, however, is to discuss the tax aspects of all the possible outcomes. While some tax consequences are straightforward, there are several interesting and less certain tax results that could apply to all three parties (Citibank, Revlon, and the lenders). This Article will explain those possibilities and review the tax doctrines that will apply once Citibank’s litigation has concluded.


Cardozo Law Review de·novo



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