Author Topic: Treatment of assets that are regulated by the National Firearms Act  (Read 869 times)

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beaktl

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Ok, you guys have been great at answering my questions.  I have one more that seems to be a bit of a stumper.

As I mentioned in another post I used to be a gun dealer, organized as a S Corp.  I have a pretty large judgment against me and will probably go down the bk route, probably chapter 13 but maybe chapter 7.  The only remaining inventory are all items covered by the National Firearms Act.  Basically silencers, short barrel shotguns, and short barrel rifles.  I assume they would be considered non-exempt property which could normally be seized based on the judgment or sold off by a bk trustee.

Here's the catch.  Due to NFA rules, I cannot transfer them to anybody without a ton of paperwork and prior approval from the ATF.  To transfer to a trustee there would be a $200 tax stamp per item and about six month to one year wait.  Then for the trustee to transfer them to anybody, they would have to go through the same process.  They would also only be able to be transferred in state.  Technically if a constable showed up, they can seize them since they are law enforcement but would have to go through the same process to get them to the trustee and so on.  The only other option is I could just surrender them to law enforcement (like my local PD) for their use or surrender them to the ATF for destruction.  Or destroy them myself.

One other possible alternative is that if trustees can just take control of the corporation they might be able to do a transfer direct from the corporation to a buyer but then they'd have to know how.

So I'm not sure how these would end up being treated as far as value for chapter 13 or if they would even bother to go after them for the judgment or chapter 7.  Most were demos so they've been fired and the used silencer market is pretty soft anyway especially considering they are older models. 

So any thoughts?

CleaningUp

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Re: Treatment of assets that are regulated by the National Firearms Act
« Reply #1 on: September 24, 2016 08:54:53 PM »
A bankruptcy court can order the transfer.  They aren't constrained by the niceties of federal firearms law.

They will, in all likelihood, turn them over to a licensed firearms dealer to complete sale with the proceeds going to the estate.  Auction houses do this all the time.

But, beware.  Since these are, in essence, distressed merchandise, the likelihood of having only the wholesale value credited to the the your trustee account.


Flyingifr

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Re: Treatment of assets that are regulated by the National Firearms Act
« Reply #2 on: September 25, 2016 06:39:17 PM »
A bankruptcy court can order the transfer.  They aren't constrained by the niceties of federal firearms law.

They will, in all likelihood, turn them over to a licensed firearms dealer to complete sale with the proceeds going to the estate.  Auction houses do this all the time.

But, beware.  Since these are, in essence, distressed merchandise, the likelihood of having only the wholesale value credited to the the your trustee account.

The BK Court isn't constrained by the niceties of federal firearms laws, but the BUYER of the goods still is. It is highly probable that the paperwork and waiting time will depress the already depressed distress sale value of these goods to the point where the costs of the sale would exceed any realistic amount to be received. I would be using this sort of math to convince the Trustee to simply abandon these goods as "non-marketable" at which point the OP gets to keep them.

I doubt the "gun dealer" designation is owned and issued to a corporation, but rather to an individual. If it were issued to a corporation then every inmate in every prison could establish a corporation and get a gun dealer license. If the license is personal, then it cannot be transferred to any third party - they would have to go out and get their own license - before getting ANY of the goods. Once again, time and the expense of buying the goods depresses the already depressed Distress Sale value of these goods. It is looking more and more like a probable abandonment.
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beaktl

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Re: Treatment of assets that are regulated by the National Firearms Act
« Reply #3 on: September 25, 2016 08:36:37 PM »
Thanks for the point about the buyer being constrained and non-marketable property, that makes a lot of sense

When it comes to a FFL, a corporation can be issued one and in fact most manufacturers, distributors and large dealers are organized as corporations.  As you can imagine they can use the liability shield.  The way they get around the felon part is that every FFL has to have at least one "Responsible Person" who does go through a background check including fingerprints.  In my case it was me but for a manufacturer like Glock I might be one or more corporate officers and then for places like Bass Pro or Wal-Mart there has to be a responsible person for each location so it's usually the gun department manager or store manager.  If there is ever a change in ownership the new owner must designate a new responsible person if needed.

It's also possible for corporations to buy and own firearms.  A background check is still done on the person buying the firearm on behalf of the corporation though.  Possession and transfer laws still apply to people individually though.  So say the president of the corp who was clean bought a gun and then let an employee use it.  If that employee was a felon the employee would be guilty of unlawful passion and if the president knew, or should have know, he was a felon then he would be guilty of an illegal transfer.

kevinmanheim

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Re: Treatment of assets that are regulated by the National Firearms Act
« Reply #4 on: September 26, 2016 03:33:58 PM »
I would ask this question to an attorney who specializes in gun trusts. There are many, and some answer questions online for free.

 

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