Opinion ID: 527542
Heading Depth: 2
Heading Rank: 2

Heading: The IRS Claim of Priority Under 31 U.S.C. Sec. 3713(a)

Text: 76 The IRS argues, alternatively, that it is entitled to priority under 31 U.S.C. Sec. 3713(a)(1)(A) (1982). That section provides that a government claim is entitled to priority over the claims of others if the person indebted to the government is insolvent, lacks sufficient property to pay all his debts, and makes a voluntary assignment of property, or if that person is insolvent and commits an act of bankruptcy. Since liability for federal income tax arises shortly after the end of the taxpayer's tax year, i.e., at the time the tax return is due, see 26 U.S.C. Sec. 6151(a) (1982); Viles v. Commissioner, 233 F.2d 376, 379-80 (6th Cir.1956), and the taxpayer at that time becomes indebted to the government for any amounts not then or theretofore paid, the present argument is that, regardless of when the assessments were made, Levine and Wilkis were indebted to the government at the time of their disgorgements, and the disgorgements to the receiver triggered application of Sec. 3713(a)(1)(A). We are not in a position to rule definitively on the applicability of that section. Assuming arguendo that the appointment of a receiver would generally constitute an act of bankruptcy, but see Nolte v. Hudson Nav. Co., 8 F.2d 859, 866 (2d Cir.1925) (appointment of receiver not necessarily act of bankruptcy within meaning of predecessor to Sec. 3713(a)); cf. Manufacturers' Finance Co. v. McKey, 294 U.S. 442, 447, 55 S.Ct. 444, 446, 79 L.Ed. 982 (1935) (same with respect to bankruptcy statute), or that the assignment in the circumstances of this case can be termed voluntary within the meaning of the statute, the record does not indicate that the government established the insolvency of either Levine or Wilkis. Each was allowed to retain certain specified assets; the record is vague as to the extent of their debts. 77 The government's Sec. 3713(a) argument was rejected in the district court on the ground that the assets in question were held in constructive trust. In all the circumstances, and in light of our discussion in Part II.D. below, we leave it to the district court to consider this argument on remand.