The U.S. Supreme Court ruled yesterday that farmers who sold farm assets during a bankruptcy reorganization under chapter 12 of the Bankruptcy Code were liable for the full amount of the capital gains tax that resulted from the sale, the Journal of Accountancy reported yesterday. In an opinion that affirmed a Ninth Circuit decision and resolved a split in the circuits, a divided Supreme Court (in an opinion by Justice Sonia Sotomayor joined by Chief Justice John Roberts and Justices Samuel Alito, Clarence Thomas, and Antonin Scalia) held that federal income tax liability resulting from the farmers' post-petition farm sale is not "incurred by the [bankruptcy] estate" under Section 503(b) of the Bankruptcy Code and therefore not dischargeable in a chapter 12 bankruptcy. Click below to access the opinion and background information in Hall v. U.S.
