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Vol 13, Num 1 l August 2016

Technology and Intellectual Property

► In This Issue:

When Will a Bankruptcy Court Hear a Tax Claim?


Lauren M. McNair
U.S. Bankruptcy Court (D. Mass.)
Berlin, Mass.


Despite lingering questions concerning the scope of a bankruptcy court’s jurisdiction in the wake of Supreme Court decisions in Stern v. Marshall and Wellness Int’l Network, Ltd., et al v. Sharif, the Bankruptcy Code has consistently been interpreted to confer the authority to determine tax questions on bankruptcy courts. Bankruptcy Code §§ 501 and 502 allow the bankruptcy court to estimate and determine the allowability of claims (including tax claims) against a bankruptcy estate. Additionally, § 505(a) provides a broad grant of jurisdiction upon the bankruptcy court to determine the tax liability of a debtor or bankruptcy estate. But while § 505(a)(1) might lead many to believe that a debtor with a tax dispute could select the bankruptcy court as their chosen in which forum to litigate (as opposed to the traditional choices of tax court, district court or the court of federal claims), limitations on the bankruptcy court’s reach do exist.
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Tardiness in Filing Income Tax Return Leads to Interplay Between Bankruptcy and Tax Law


Anna Haugen
U.S. Bankruptcy Court (M.D. Fla.)
Jacksonville; Fla.


Kamila Sznyrowska
Sznyrowska Mlodawska Legal Partners Sp.p
Radom, Poland

While the bankruptcy process may bring a new beginning, the Bankruptcy Code provides — and some say rightfully so — debtors with much less protection against tax claims than other types of claims for public policy and much-applauded revenue reasons. Even though there is much to say about this topic, this article only narrowly addresses 11 U.S.C. § 523‌(a)‌(1)‌(B), which provides, among other things, an exception to discharge for tax debt with respect to which a return, if required, was not filed, and focuses on the Eleventh Circuit’s opinion in Justice v. United States (In re Justice).

By way of introduction, looking solely at the language of § 523‌(a)‌(1)‌(B)‌(i) (which, as previously mentioned, provides that tax liability is nondischargeable if a debtor failed to file a return), one could easily conclude that any return filed after the due date would place the outstanding tax debts outside of the scope of nondischargeability. Prior to enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), neither the Bankruptcy Code nor the Internal Revenue Code provided a definition of a “return.” Nevertheless, courts attempted to prevent opportunistic late tax return filings for dischargeability purposes and attempted to fashion a definition of a “return” by adopting, from the realm of tax jurisprudence, the four-element test articulated in Beard v. Comm’r of Internal Revenue
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July Edition of Eye on Bankruptcy Available Online

The most Eye on Bankruptcy session explores some of the latest court decisions in business and consumer bankruptcy. Host, Prof. Michelle Harner of the Business Law Program at the University of Maryland Francis King Carey School of Law in Baltimore, interviews speakers Jay Goffman of Skadden and Judge Joan Feeney (D. Mass). Topics this month include: pre-paid legal fees, Gawker bankruptcy and auction, mandatory arbitration and hedge fund sues over Puerto Rico’s “fiscal crisis law.”

Visit online to watch this most recent edition and view past recordings.


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