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Bankruptcy and Insolvency Taxation, 4th Edition by Robert Liquerman, Grant W. Newton

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CHAPTER TWELVE

Tax Preferences and Liens

§ 12.1 Introduction

§ 12.2 Tax Preferences

(a) General Provision

(b) Chapter 7 Liquidation Requirement

(c) Ordinary Course of Business

(d) Withholding Taxes: Property of the Estate?

(e) Statutory Lien

§ 12.3 Tax Liens

(a) Introduction

(b) Federal Tax Liens

(c) State and Local Tax Liens

(d) Priorities Outside Bankruptcy

(e) Priorities in Bankruptcy

(f) Chapter 7

(g) Chapter 11

(h) Survival of Lien

(i) Exempt Property

(i) Impact of Tax Levy

§ 12.1 INTRODUCTION

In a bankruptcy case, federal and state and local tax liens are handled differently under certain circumstances than they would be in an out-of-court case. Also, tax payments made within 90 days prior to bankruptcy may be avoided. The objective of this chapter is to examine the issues associated with tax preferences and liens.

§ 12.2 TAX PREFERENCES

(a) General Provision

The payment of a past due tax to a governmental unit can be considered a preferential payment under certain conditions. Section 547(b) of the Bankruptcy Code provides that any transfer of property of the debtor, while insolvent, in payment of an antecedent debt owed by the debtor to an unsecured creditor may be avoided if made within 90 days before the petition is filed.

There is no specific statutory provision generally authorizing chapter 13 debtors to exercise trustees’ avoidance powers. Thus as a general rule, courts have denied standing to chapter 13 debtors who assert a preferential transfer cause of action under ...

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