Bankruptcy Taxation

Recently, in Old West Annuity and Life Ins. Co. v. Apollo Group,[1] the Eleventh Circuit held state law determined whether a court could pierce the corporate veil under an alter ego theory even though a federal tax lien was at issue.[2] In reaching its holding, the Eleventh Circuit had to decide whether the need for a uniform federal rule justified applying the federal common law standard for determining alter ego liability or if state law applied by virtue of a state’s right to define property interests of its taxpayers.[3]

Breakfast with the Judges

Bankruptcy Code

109

Topics

Discharge/Dischargeability

Family/Divorce Issues

Bankruptcy Taxation

Small Business

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Section 1129(d)s Firm Stance The Effect of Reorganization as a Vehicle for Tax Avoidance

By: Jon H. Ruiss, Jr., CPA
St. John's Law Student
American Bankruptcy Institute Law Review Staff

Recently, in In re South Beach Securities, Inc., the Seventh Circuit affirmed the old adage that a bankruptcy court could not confirm a chapter 11 plan when the plan’s sole purpose is designed to make use of the debtor’s net operating losses (NOLs) as a tax benefit for the creditor.[1] The plan intended to obtain a tax deduction for the debtor’s sole creditor through the plan.[2] In a scolding opinion by Judge Posner, the court held that the plan violated of section 1129(d), and therefore, was proposed in bad faith.[3] Section 1129(d) states that a plan cannot be confirmed when its principal purpose is tax avoidance.[4]

Bankruptcy Taxation/Young and New Members: The Practical and Tax Implications of 363 Sales

Bankruptcy Code

Topics

Practice and Procedure

Bankruptcy Taxation

Business Reorganization

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Overpaid Taxes Need Not be Turned Over to the Estate Under Section 542(a)

By: Christopher J. Rubino
St. John’s Law Student
American Bankruptcy Institute Law Review Staff

In Weinman v. Graves (In re Graves)[1], the Tenth Circuit held that section 542(a)[2] does not permit a chapter 7 trustee to force the IRS to turnover overpaid taxes of joint debtors where the debtors elected to apply the overpayment to the next year’s tax liability. In Graves the joint debtors elected to apply their 2006 tax refund to their 2007 tax liability.[3] Two months after filing their tax returns, the debtors filed for bankruptcy.[4] The Tenth Circuit affirmed the bankruptcy court’s refusal to order the IRS to turnover the debtors’ 2006 tax refund under section 542(a).[5]

The Fifth Circuit Holds Trustee Personally Liable for Failure to Remit State Sales Tax

By: Katelyn Trionfetti
St. John’s Law Student
American Bankruptcy Institute Law Review Staff

In Texas Comptroller of Public Accounts v. Liuzza (In re Texas Pig Stands, Inc.),[1] the Fifth Circuit considered whether a bankruptcy trustee could be held personally liable for failing to remit state sales tax pursuant to Texas Tax Code section 111.016(b).[2] In Texas Pig Stands, the state taxing authority brought an adversary proceeding against a bankruptcy trustee after the trustee failed to timely remit state sales tax, which violated a court order and a court approved reorganization plan.[3] The Fifth Circuit held that the trustee was personally liable for over $100,000[4] in taxes he failed to remit.[5]