Parties to a chapter 13 bankruptcy often contest the status and dischargeability of income tax claims, especially when proofs of claim for these taxes are filed late. Prepetition claims that are filed late may be discharged once the debtor successfully completes a chapter 13 repayment plan. Taxing authorities, however, often allege that these liabilities represent nondischargeable postpetition claims that have "become payable" after the bankruptcy petition was filed. Courts have resolved this issue in conflicting ways: while some have found that taxes "become payable" at the end of the taxable year, most have ruled that the tax return's due date was decisive. This Note observes, however, that this conflict appears rooted in a difference of fact. Courts favoring a tax-return rule have been addressing tax claims in the year the bankruptcy was filed. By contrast, courts that apply a taxable-yea r rule have been discussing tax claims for the year immediately preceding the bankruptcy filing. Finding this distinction significant, this Note presents an outline for analyzing income tax liability in chapter 13 cases and concludes that both the type of tax claim faced by each court and the petition-filing timeline are as significant to the courts' analyses as their respective interpretations of the phrase "become payable." Applying this framework, this Note illustrates that the taxable- year rule better establishes the critical date upon which taxes should "become payable" to a taxing authority.
Janicelynn J. Asamoto,
Reconciling Ripley and Joye: A Fact-Sensitive Analysis of Petition-Year and Pre-Petition-Year Income Tax Claims in Chapter 13 Bankruptcies,
79 Fordham L. Rev. 521
Available at: http://ir.lawnet.fordham.edu/flr/vol79/iss2/5