If you suffered losses in LINN Energy (LINE or LNCO), including tax obligations, you may be entitled to recovery of those losses. Please call 1-866-817-0201 for a free consultation with a lawyer about loss recovery. We have successfully recovered losses for many Linn Energy investors. Most representations handled on a contingency basis where attorney fees are not due unless a recovery is received.
LINN Energy, which changed its name to LinnCo, stated on March 16, 2016 that bankruptcy protection through the courts may be unavoidable. This prediction came true on May 11, 2016 when LINN filed for bankruptcy per Rueters. This will leave many investors who have invested their life savings in LINN looking to change their retirement plans and their financial outlook. For many of these investors LINN Energy was never a suitable investment, and this fact may give the individuals the right to recover their losses.
While some investors may call it “LINN” and others refer to it as “LINE,” all investors can agree that investors should not be responsible for the losses in LINN Energy to the extent that the investment was procured by fraud or negligence. Brokerages that allow the sale of unsuitable investments are responsible for the ultimate losses sustained by their investors. Brokers and financial advisors have a duty to only sell suitable investments to investors. To be suitable, the investment must be consistent with the wants and needs of the investor.
LINN Energy is, and has always been, a speculative investment. Unless you are a speculative investor and could afford to gamble on high risk investments LINN Energy was unsuitable for you. The list of people for whom LINN would be unsuitable and entitled to reimbursement includes, but is not limited to, any one of the following: conservative to moderate investors; investors reliant upon investments for income; individuals reliant upon their savings; unsophisticated investors; individuals not understanding the risks of limited partnerships; individuals who could not afford to risk the amounts invested in LINN: and individuals who would have difficulty re-earning the funds invested in LINN if the investment were completely lost.
The recommendation to invest in LINN can be the result of either negligence or fraud. Speculative investments often pay a higher commission and give brokers incentive to recommend investments that are not in the best interest of their investors. Irrespective, the broker’s or financial advisor’s employer is responsible for losses as the result of unsuitable recommendations.
The risk surrounding LINN are many and not just from the falling oil market. The potential tax consequences for its investors, referred to as CODI, if LINN were to restructure some of its debt will also impact the value of the investment. When debt is restructured, debt that is forgiven is, for tax purpose, treated as income. Since LINN is an LLC, the tax liability belongs to the investors holding Linn shares. This will further increase the losses of those holding LINN shares if they must pay tax on the income of LINN.
LLCs are popular because income is only taxed once, unlike regular corporations where the income of the corporation is taxed and the resulting dividends are also taxed. While the single taxation is popular because it means less taxation of income when things are good, the downside is that investors are responsible for the tax the LLC cannot pay when things are bad. That can accelerate the decline of an LLC when industry challenges, such as a decrease in the price of oil, occur.
By some estimates, investors will be responsible for paying CODI of approximately $24 per share in tax liability to the IRS even if they no longer hold the shares. Even though the shares may be worthless. So say an investor purchase $40,000 worth of the investment when Linn was trading at $40 per share, that individual may have to pay the IRS $24,000 for the tax liability of Linn.
Further, Linn offered investors the opportunity to trade in their shares for shares that protected investors from such liability, but Linn and the brokers selling Linn gave investors very little and we believe insufficient notice to investors concerning the opportunity to make the transition and the severe consequence if the transition was not elected. The deadline to exchange LINE units expired on August 1, 2016. Forbes estimates that only 35% of the Linn investors successfully made this switch to avoid payment to the IRS. The other 65% will have to pay for Linn’s mismanagement beyond the extent they invested in Linn.
On August 2, 2016, Linn issued the following statement concerning the exchange period:
“The subsequent offering period for the Exchange Offer expired at 12:00 midnight (New York City time) on Monday, August 1, 2016 […] a total of 19,954,774 LINN units were validly tendered during the subsequent offering period and an aggregate of 123,909,317 LINN units (including LINN units accepted for exchange during the initial offering period), representing approximately 35% of LINN’s issued and outstanding units, were validly tendered and not validly withdrawn pursuant to the Exchange Offer and have been accepted by LinnCo for exchange. “
This is all in addition to the likely losses that shareholders would feel from that restructuring and oil prices that may not rise above $40 per barrel in the near future. LINN and LINCO investments likely became worthless on May 11, 2016. On that date, LINN filed for Chapter 11 bankruptcy protection per Rueters.
Please call for more information. The Law Offices of Jeffrey Pederson has represented investors with suitability claims in FINRA arbitrations across the country. Most representations done on a contingency basis.
Other liability issues exist as to certain securities brokerages pushing this investment even when it became clear that the investment was troubled. For example, Raymond James pushed LINE to its brokers to sell to all investors, upon information and belief. Additionally, Raymond James kept strong ratings on LINE as late as 2016.
For a detailed description on the rise and fall of Linn: http://www.oilandgas360.com/rise-fall-linn-energy/
For a great article on the mess investors will be facing, along with an estimate of tax liability Linn investors will face: http://www.forbes.com/sites/christopherhelman/2016/05/19/oil-bankruptcies-continue-linn-energy-reorg-wont-be-pretty/#35f687375edc .