One of the most attractive benefits of a bankruptcy filing is the potential discharge of indebtedness.[1] However, the bankruptcy discharge may have significant tax consequences for the debtor. Generally, a taxpayer must include, in its gross income, any amount of debt that is discharged, or cancelled, other than by payment.[2]
26 U.S.C. § 6901 and Internal Revenue Code § 6901 enable the IRS Commissioner to collect deficient or underpaid corporate income taxes from a transferee of property. In the recently decided case of Slone v. Commissioner,[1] the appeals court was asked to decide whether the tax court had made an appropriate decision by holding that
Editor’s Note: The following article, “The Purchaser of a Tax Lien Is the Holder of a 'Tax Claim' Under 11 U.S.C. § 511(a),” won the prize for second place in the Seventh Annual ABI Bankruptcy Law Student Writing Competition. The author, Andrew Reardon, is a recent graduate of St. John’s University School of Law in Jamaica, N.Y. In addition to recognition and publication of his article in the Bankruptcy Taxation Committee Newsletter, Mr. Reardon receives a cash award of $1,250, sponsored by Jenner & Block LLP, and a one-year ABI membership.
An unsecured creditors’ committee is supposed to be representative of the interests of a diverse group of unsecured creditors with an interest in the outcome of a debtor’s reorganization or “fresh start.” Landlords with lease-rejection claims, parties to rejected equipment leases, trade creditors, unsecured bondholders and the Pension Benefit Guaranty Corporation are a few examples.
Add the Western District of New York to those courts holding that in rem tax foreclosures are not presumed to provide reasonably equivalent value to a debtor. In Canandaigua Land Development LLC v. County of Ontario (In re Canandaigua Land Dev. LLC), 521 B.R. 457 (Bankr. W.D.N.Y.
Section 365 of the Bankruptcy Code authorizes a debtor to assume or reject an executory contract.[1] An executory contract that has expired in accordance with its terms is generally not subject to assumption or rejection under the Code.
Recently, the U.S. Bankruptcy Court for the District of Delaware had the opportunity to further clarify the power of § 363 sale processes to cleanse assets and the fragile nature of pension claims in bankruptcy. The court considered and rejected an objection to a § 363 sale free and clear of any successor liability claim where the sale was supported by the debtors, the lenders and the unsecured creditors’ committee, but not the pension trust.
Once disfavored, non-compete agreements — contractual provisions prohibiting employees from competing with their former employers upon the relationship’s termination — have acquired new legitimacy in recent decades.
Editor’s Note: This article is intended for educational purposes only. It is not intended to be legal, accounting or other professional advice. A party should consult with legal counsel when dealing with the issues addressed in this article. The views expressed in this article are solely those of the author and do not necessarily represent the views or opinions of Husch Blackwell LLP.
[1]A trustee for a bankrupt entity or a debtor has the power to bring an action to avoid and recover constructive or actual fraudulent transfers. Section 544(b) of the Bankruptcy Code specifically allows a trustee or debtor to step into the shoes of an actual creditor of the debtor, who could have avoided the transfer outside of bankruptcy using state law. The U.S. Court of Appeals for the Seventh Circuit recently analyzed a debtor’s power to bring a state law fraudulent-transfer action..
