For the case description plain english whether capital gain taxes created by the sale of the family farm during a Chapter 12 bankruptcy proceeding are payable as an administrative expense under the bankruptcy reorganization plan?
Facts of the case Lynwood and Brenda Hall had to file for Chapter 12 Bankruptcy and in due had to pay $980,000 in bankruptcy debt. Hall was forced to sell their family farm to pay for the debt. But what Hall didn't see coming is that there was also a capital gains tax of $26,000. Hall wanted the taxes to be payed as a part of the bankruptcy. Much of the IRS disowns these request because the accumulated gain taxes were presented in 2005. But what is stated in Chapter 12 is that when filed the debt towards the debtor or the debtors property "automatically stays". But which is also stated under the 11 U.S.C. § 362(B) does not operate as a sort of tax refund to the debtor. That was from just researching the Bankruptcy Filing Chapter which I just found out that is irrelevant.
Before the Argument written by Ronald Mann, he describes this case as being a classic puzzle. Also he explains that they were lucky to find a purchaser that would be willing to pay well above for the debt against it. With some over view there might be some good beginning statements for her case but the process for completing the Chapter 12 Bankruptcy was done incorrectly.
My Prediction of the Outcome I believe that this case does bring up many constitutional and congressional questions to how this case should be handled but it shows more in favor of the United States for Hall to pay for the $26,000 gains tax. Being in debt since 2005 and then filing for bankruptcy should cover when the trustee is not controlled by the estate and when the estate does not cover administrative fees the taxes should be payed. Also as said, they were lucky to find a purchaser to pay with already larger amount of applied debts.