Source: http://openjurist.org/291/f3d/1238/in-re-john-marshall-tuttle
Timestamp: 2015-10-06 00:09:06
Document Index: 194292904

Matched Legal Cases: ['§ 507', '§ 523', '§ 1141', '§ 1129', '§ 502', '§ 502']

291 F3d 1238 In Re John Marshall Tuttle | OpenJurist
291 F. 3d 1238 - In Re John Marshall Tuttle HomeFederal Reporter, Third Series291 F.3d
291 F3d 1238 In Re John Marshall Tuttle 291 F.3d 1238
In re John Marshall TUTTLE; Leona Julia Tuttle, Debtors,Leona Julia Tuttle, Appellant,v.United States of America, Appellee.
No. 01-3129.
Todd A. Luckman (Gary H. Hanson and Wesley F. Smith with him on the brief), Stumbo, Hanson & Hendricks, LLP, Topeka, KS, for the appellant.
Curtis C. Pett, Attorney, Tax Division, Department of Justice (Eileen J. O'Connor, Assistant Attorney General; Bruce R. Ellisen, Attorney, Tax Division, Department of Justice; and James E. Flory, United States Attorney, with him on the brief), Washington, DC, for the appellee.
Tuttle and her husband filed a Chapter 11 bankruptcy petition in April 1993. The IRS filed an amended claim for $53,997.35. Of this amount, $40,519.17 was for a priority claim, and $13,478.18 represented a general unsecured claim. Tuttle's Chapter 11 reorganization plan was confirmed by the bankruptcy court in December 1999. Tuttle paid the total amount of the IRS claim pursuant to her reorganization plan. However, the IRS subsequently sought to recover, from her personally, gap interest totaling approximately $30,000 that accrued on its priority tax claim between the time she filed her bankruptcy petition and the time her plan was confirmed.1
"In our review of BAP decisions, we independently review the bankruptcy court decision." In re Albrecht, 233 F.3d 1258, 1260 (10th Cir.2000). Where, as here, "[t]here are no factual disputes and the issues on appeal pertain to the proper application of bankruptcy statutes and the interpretation of case law," our review is de novo. Id.
In addressing Tuttle's arguments, we begin by reviewing how IRS claims for unpaid taxes are treated in Chapter 11 bankruptcy proceedings. Like other creditors, the IRS has the right to file a claim in a Chapter 11 bankruptcy proceeding to seek repayment of unpaid taxes. "If the IRS has a[n unsecured] claim for taxes for which the return was due within three years before the bankruptcy petition was filed, the claim enjoys eighth priority under [11 U.S.C.] § 507(a)(8)(A)(i) and is nondischargeable in bankruptcy under § 523(a)(1)(A)." Young v. United States, ___ U.S. ___, ___, 122 S.Ct. 1036, 1039, 152 L.Ed.2d 79 (2002); see also 11 U.S.C. § 1141(d)(2) (providing that confirmation of a Chapter 11 plan "does not discharge an individual debtor from" liability for priority tax claims). As part of its claim against the bankruptcy estate, the IRS may also seek pre-petition interest and penalties. E.g., In re Bates, 974 F.2d 1234, 1237 (10th Cir.1992) ("Pre-petition interest has the same priority as the underlying tax providing the interest accrued pre-petition."). Depending on the terms of a confirmed Chapter 11 plan, the IRS may also receive post-confirmation interest on its priority tax claims. See 11 U.S.C. § 1129(a)(9)(C).
At issue here is whether the IRS may also collect post-petition, pre-confirmation interest (i.e., gap interest) on the IRS's priority tax claims. Like other creditors in bankruptcy proceedings, the IRS is generally precluded from including unmatured interest as part of its claim. Specifically, § 502(b)(2) of the Bankruptcy Code provides that unmatured interest cannot be allowed as a claim against the bankruptcy estate. 11 U.S.C. § 502(b)(2). The purpose