Taxes

TAX

1. Cal. Rev. & Tax Code §6051

2. Cal. Rev. & Tax Code §18590

3. Cal. Rev & Tax Code § 6829

4. Ch 11

5. Ch 7

6. Ch 12

7. Ch 13

8. ERISA Pension

9. Excise Tax

10. §362(b)(4)

11. §362(h)

12. §503(10)(1)(B)(I)

13. §505

14. §506

15. §507(a)(7)

16. §523(a)(1)

17. §523(a)(7)

18. §724(b)

19. §4971(a) of the IRC

20. Trustee

21. Trust Fund

22. 26 U.S.C. §6321

23. 26 U.S.C. §7421(a)

24. 26 U.S.C. § 6323(f)

25. 26 U.S.C. § 6502

26. Misc

1. Cal. Rev. & Tax Code §6051

In re Raiman, 172 B.R. 933 (9th Cir. B.A.P. 1994)

Tax claims against debtor not dischargeable when claims based on California code section

taxing gross receipts of retailer even though some exclusions listed in code. Rev & Tax § 6051 is a

(a)(7) tax

2. Cal. Rev. & Tax Code § 6829

In re Leal, 366 B.R. 77 (9th Cir. BAP 2007)

General partners are jointly and severally liable for nonpayment of sales taxes.

3. Cal. Rev. & Tax Code §18590

In re Bracey, 77 F.3d 294 (9th Cir. 1996)

When taxes are assessed under Cal. Rev. & Tax Code § 18590 et seq.; how the 60-day time

limit for protest must be read

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4. Ch 11

In re Artisan Woodworkers, 204 F.3d 888 (9th Cir. 2000)

Postpetition preconfirmation interest and penalties on nondischargeable tax were not

discharged following payment in full of prepetition debt and postconfirmation interest pursuant to

confirmed Ch 11 plan.

United States v. Energy Resources Co., Inc., 495 U.S. 545 (U.S.R.I. 1990)

Bankruptcy court may order IRS to treat Ch. 11 tax payments by debtor corporation as trust

fund payments if necessary for reorganization plan

In re Stanmock, Inc., 103 B.R. 228 (9th Cir. B.A.P. 1989)

Can’t confirm Chapter 11 plan which allows debtor to designate how IRS will allocate

payments

In re Condel, Inc., 91 B.R. 79 (9th Cir. B.A.P. 1988)

1. IRS may not be enjoined from collecting taxes from officers or directors via Chapter 11

plan.

2. IRS may apply tax payments as they see fit, since payments are not deemed “voluntary”

5. Ch 7

In re Feiler, 218 F.3d 948 (9th Cir. 2000)

Chapter 7 trustee may recover tax refunds from United States after avoiding debtors’

prepetition election to carry forward net operating loss.

6. Ch 12

U.S. v. Hall, 617 F.3d 1161 (9th Cir. 2010)

Because a chapter 12 estate cannot, under the Internal Revenue Code, incur a tax, it cannot

take advantage of § 1222(a)(2)(A), which allows for less than full payment and discharge of

unsecured, non-priority debts owed to governmental entities arising out of the sale of a farm. Had

the sale occurred prepetition, that statute would apply, but here it occurred postpetition. Thus, the

debtors are liable for the tax.

7. Ch 13

In re Jones, 420 B.R. 506 (9th Cir. BAP 2009)

Because a California Franchise Tax Board debt did not fall within three-year lookback

period of § 507(a)(8)(A)(ii), neither the unnumbered paragraph of § 507(a)(8) nor equitable tolling

apply

,

and thus the tax was discharged in the debtor’s chapter 7 case. Furthermore, because all

estate property vested in the debtor upon plan confirmation, the FTB could have pursued collection

of the tax debt as a postpetition debt not subject to the automatic stay or the debtor’s chapter 13

case.

In re Joye, 578 F.3d 1070 (9th Cir. 2009)

Tax debt owed to California Franchise Tax Board was discharged, where the debtor

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properly listed the FTB in his schedules as being owed $10,000, even though the actual amount

owed was over $26,000. Section 1305(a)(1) was not applicable, since the debt was incurred

prepetition. “. . . [W]e hold that taxes become “payable” for purposes of section 1305(a)(1) when

they are capable of being paid.” here, the taxes were capable of being paid prepetition.

In re Fowler, 394 F.3d 1208 (9th Cir. 2005)

“We hold that § 348(d) requires that postpetition employment tax debt, incurred as an

administrative expense of a Chapter 11 bankruptcy estate, retains its first priority administrative

expense status upon conversion to a Chapter 13 bankruptcy plan. Section 1305 is not in conflict

with this holding because it does not govern the priority of the postpetition claims it allows into the

bankruptcy.”

In re Bisch, 159 B.R. 546 (9th Cir. B.A.P. 1993)

A federal tax lien which was not included as a part of the IRS proof of claim and not

provided for in the Chapter 13 remains valid despite confirmation of the plan

In re Tomlan, 907 F.2d 114 (9th Cir. 18990)

IRS must file a proof of claim to obtain priority status in Chapter 13

8. ERISA Pension

In re Snyder, 343 F.3d 1171 (9th Cir. 2003)

Debtor’s interest in a pension plan was not property of the estate, and thus it could not be

used to secure the IRS’s claim for delinquent taxes in his chapter 13 case. This is so, even though

the IRS is not subject to ERISA’s antialienation provisions.

In re McIntyre, 222 F.3d 655 (9th Cir. 2000)

The IRS may levy upon ERISA-regulated pension benefits to satisfy a husband’s tax debt

against the claim that the wife has a vested interest in half of those benefits under California

community property laws

.

In re Connor, 27 F.3d 365 (9th Cir. 1994)

Fed tax lien enforceable against a bankruptcy debtor’s future pension payments where the

debtor’s unqualified right to receive the payments mature before he filed for bankruptcy

In re Anderson, 149 B.R. 591 (9th Cir. B.A.P. 1992)

A debtor’s interest in an ERISA pension plan is property or a right to property to which an

IRS tax lien could attach pursuant to 26 U.S.C. § 6321

9. Excise Tax

In re Lorber Industries of California, 564 F.3d 1098 (9th Cir. 2009)

Reimbursement amounts for workers’ compensation claims owed to the California Self-

Insurer’s Security Fund are not in the nature of an excise tax.

In re George, 361 F.3d 1157 (9th Cir. 2004)

Claim by California Uninsured Employers Fund against employer who failed to purchase

workers’ compensation insurance was not “excise tax” for purposes pf bankruptcy law.

10. §362(b)(4)

In re Universal Life Church, Inc., 128 F.3d 1294 (9th Cir. 1997), cert. denied, 524 U.S. 952 (1998)

IRS’s revocation of tax exempt status was within 362(b)(4)

11. §362(h)

In re Pinkstaff, 974 F.2d 113 (9th Cir. 1992)

IRS subject to 362(h)

12. §503(10)(1)(B)(I)

In re Pacific-Atlantic Trading Co., 64 F.3d 1292 (9th Cir. 1995)

When is a tax “incurred by the estate”. When does § 503(10)(1)(B)(I) apply

Application of § 507(a)(7)(A)(iii)

13. §505

Central Valley AG Enterprises v. U.S., 532 F.3d 750, 764 (9th Cir. 2008)

Notwithstanding the finality provisions of the Tax Equity and Fiscal Responsibility Act of

1982, “Section 505 provides for bankruptcy jurisdiction to redetermine a debtor’s tax liabilities

notwithstanding the preclusive effects to which a tax judgment might otherwise be entitled.”

American Principals Leasing Corp. v. U.S., 904 F.2d 477 (9th Cir. 1990)

Bankruptcy court does not have jurisdiction to determine nondebtors tax under § 505

14. §506

In re Pletz, 221 F.3d 1114 (9th Cir. 2000)

Under Oregon law, chapter 13 debtor’s interest in property held by debtor and nondebtor

spouse as tenants by the entirety had to be valued under § 506 to reflect concurrent interests of

both spouses.

15. §507(a)(7)

In re Gurney, 192 B.R. 529 (9th Cir. B.A.P. 1996)

Equitable tolling extended § 507(a)(7) priority period for Arizona state taxes

16. §523(a)(1)

In re King, 122 B.R. 383 (9th Cir. B.A.P. 1991), aff’d. 961 F.2d 1423 (9th Cir. 1992)

Cal. Law: taxes are assessed for purposes of 523(a)(1) when they are final, i.e., 60 days after

notice of proposed additional tax (when a notice of proposed deficiency assessment becomes final).

17. §523(a)(7)

McKay v. U.S., 957 F.2d 689 (9th Cir. 1992)

Tax penalties incurred more than 3 years prior to filing of petition are discharged under

523(a)(7)

18. §724(b)

In re Markair, Inc. (I), 308 F.3d 1038 (9th Cir. 2002), cert. denied, Barstow v. I.R.S., 539 U.S. 926

(2003)

“[T]he term “tax lien” in § 724(b) means a statutory tax lien and …does not embrace a

judicial lien securing an underlying tax obligation.”

In re Markair, Inc. (II), 308 F.3d 1057 (9th Cir. 2002)

“We hold that, under § 724(b), priority unsecured creditors have a right to obtain only that

portion of the proceeds equaling the amount of the tax liens; any remaining proceeds go first to the

junior lien claimants, then to the holders of the tax liens insofar as their claims were not already

satisfied and, finally, to the estate.”

19. §4971(a) of the IRC

United States v. Reorganized CF&I Fabricators of Utah, Inc., 518 U.S. 213, 116 S.Ct. 2106 (1996)

Exaction imposed by § 4971(a) of the IRC on the amount of an accumulated funding

deficiency of a pension plan is “not entitled to seventh priority as an ‘excise tax’ under §

507(a)(7)(E), but instead, is, for bankruptcy purposes, a penalty to be dealt with as an ordinary,

unsecured claim.”

20. Trustee

Raleigh v. Illinois Dept. of Revenue, 530 U.S. 15, 120 S.Ct. 1951 (2000)

When the substantive law creating a tax obligation puts the burden of proof on a taxpayer,

the burden of proof on the tax claim in bankruptcy court remains where the substantive law put it

(in this case, on the trustee in bankruptcy).

In re Bakersfield Westar, Inc., 226 B.R. 227 (9th Cir. B.A.P. 1998)

Small Business trustee may avoid shareholders’ Subchapter S revocation as fraudulent

transfer of property conferring benefit on shareholders at expense of company’s creditors.

U.S. v. Hemmen, 51 F.3d 883 (9th Cir. 1995)

Trustee liable on tax levy, even though it was made before court actually fixed the amount

of administrative expense payment to be paid to debtor’s principal. 362 inapplicable

Holywell Corp. v. Smith, 503 U.S. 47, 112 S.Ct. 1021 (1992)

Trustee must file taxes for debtors

21. Trust Fund

In re Hamilton Taft & Co., 53 F.3d 285 (9th Cir. 1995),

Vacated

, 68 F.3d 337 (9th Cir. 1995)

Trust Fund. Money transferred to third party not subject to statutory trust.

In re Deer Park, Inc., 136 B.R. 815 (9th Cir. B.A.P. 1992), aff’d. 10 F.3d 1478 (9th Cir. 1993)

Bankruptcy court had power to order IRS to allocate tax payments to offset trust fund tax

liabilities

In re GLK, Inc, 921 F.2d 967 (9th Cir. 1990), cert. denied, 501 U.S. 1205 (1991)

In light of U.S. v. Energy Resources Co.,, 110 S.Ct 2139 (1990), bankruptcy courts could

order debtors’ IRS payments allocated to offset trust-fund tax liability but need not do so where

such allocation is not necessary to reorganization

In re Major Dynamics, Inc., 897 F.2d 433 (9th Cir. 1990)

Post-petition tax withholding funds subject to bankruptcy code’s priorities and do not create

IRS trust fund

22. 26 U.S.C. §6321

U.S. v. Barbier, 896 F.2d 377 (9th Cir. 1990)

26 U.S.C. § 6321 allows tax liens to attach to all property, even debtors’ personal property,

even debtors’ personal property exempt from levy under 26 U.S.C. § 6334.

23. 26 U.S.C. §7421(a)

In re American Bicycle Assn’, 895 F.2d 1277 (9th Cir. 1990)

Because of the Anti-Injunction Act, 26 U.S.C. § 7421(a), a bankruptcy court cannot enjoin

the IRS from collecting a 100% penalty against a responsible officer of a debtor corporation.

24. 26 U.S.C. § 6323(f)

In re Crystal Cascades Civil, LLC, 415 B.R. 403, 406 (9th Cir. BAP 2009)

A reasonable inspection of the real property records for purposes § 6323(f) “is properly

analyzed from the perspective of an ordinary reasonable person and will vary by locality. . . .”

Bankruptcy court correctly found that a reasonable inspection of the records would be by an exact

name search. IRS liens were recorded under “Crystal Cascades, LLC, a corporation” rather than

“Crystal Cascades Civil, LLC.” Thus the later-filed judicial liens on the property had priority.

25. 26 U.S.C. § 6502

Severo v. C.I.R., 586 F.3d 1213 (9th Cir. 2009)

IRS 10-year statute of limitations for collections was tolled from the time debtors filed their

chapter 11 case until the time they received a discharge in chapter 7, plus six months. Thus, the IRS

efforts to collect a 1990 tax liability that occurred prior to November 7, 2005 were not barred by the

statute of limitations.

26. Misc

In re Gould, 401 B.R. 415 (9th Cir. BAP 2009)

IRS had a valid right of setoff under 11 U.S.C. § 553 and IRC § 6402(a) as to chapter 13

debtors’ tax refunds, even though the debtor claimed them as exempt and no objection to the

exemption was filed. Bankruptcy court should have granted the IRS relief from the automatic stay

for cause to allow it to exercise its setoff rights.

In re KRSM Properties, LLC, 318 B.R. 712 (9th Cir. BAP 2004)

Limited liability corporation’s assets could not be used to pay LLC members’ personal tax

liability, where members elect to have the LLC disregarded as a separate entity.

In re Olshan, 356 F.3d 1078 (9th Cir. 2004)

Presumption of correctness of assessment applies to all items assessed, except where there is

a pattern of arbitrariness or carelessness. Although taxpayer rebutted in part presumption of

correctness as to unreported business income, IRS still had right to present evidence establishing

existence of unreported income.

In re Bunyan, 354 F.3d 1149 (9th Cir. 2004)

Bankruptcy court lacks jurisdiction to consider tax assessments, where they became final

upon dismissal of appeals in 1993.

In re Mantz, 343 F.3d 1207 (9th Cir. 2003)

Bankruptcy court had subject matter jurisdiction to determine debtor’s tax liability where

there was no final administrative determination of debtor’s tax liability prior to commencement of

bankruptcy case.

In re Montross, 209 B.R. 943 (9th Cir. B.A.P. 1997)

Partnership that had no knowledge debtor was using partnership account for money

laundering was not “transferee” for purpose of avoiding transfers into account

In re Jones, 208 B.R. 935 (9th Cir. B.A.P. 1997)

Guilty plea to “concealing ability to pay” offers no guidance on whether taxpayer

“concealed assets” within meaning of regulation addressing government’s ability to reopen case

after acceptance of offer in compromise

In re Belozer Farms, Inc., 199 B.R. 720 (9th Cir. B.A.P. 1996)

Unpaid assessments levied against chicken processor by Oregon Fryer Commission were

not a “tax” subject to priority status

In re Hovan, Inc., 96 F.3d 1254 (9th Cir. 1996)

State’s claim for unpaid tax penalties not entitled to priority status

In re Los Angeles International Airport Hotel Associates, 196 B.R. 134 (9th Cir. B.A.P. 1996),

aff’d. 106 F.3d 1479 (9th Cir. 1997)

Hotel’s complimentary beverages and breakfasts constitute sales subject to California sales

tax

In re Baker, 74 F.3d 906 (9th Cir. 1996), cert. denied, 517 U.S. 1192 (1996)

Bankruptcy court may not redetermine debtors’ tax liability as established by stipulated Tax

Court decision

In re Caroline Triangle Ltd., Partnership, 166 B.R. 411 (9th Cir. B.A.P. 1994)

Taxes are not incurred where property abandoned. Further, they were a lien, not a priority.

In re Smith, 158 B.R. 813 (9th Cir.. B.A.P. 1993)

Order requiring Washington not to deduct IRS taxes from lottery checks violated antiinjunction

provision. 26 U.S.C. 7421

In re Kimura, 969 F.2d 806 (9th Cir. 1992)

Provision requiring trade creditors to be paid as a condition to transfer of a liquor license is

invalid as to a federal tax lien

In re Sluggo’s Chicago Style, Inc., 912 F.2d 1073 (9th Cir. 1990), cert. denied, 498 U.S. 1067

(1991)

Under California law, a security deposit held by the state taxing authority was property of

the estate

In re Isom, 901 F.2d 744 (9th Cir. 1990)

IRS not required to release tax liens when underlying debt was discharged.