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Summarizing by Amir Shachmurove

Bagley v. U.S.A. (In re: Desert Capital Reit, Inc.)

Bagley v. U.S.A. (In re Desert Capital REIT, Inc.), BAP Nos. NV-13-1233-KiTaJu & NV-13-1250-KiTaJu (BAP 9th Cir. Aug. 11, 2014)
The 9th Circuit BAP affirmed the ruling of the U.S. Bankruptcy Court for the District of Nevada. The bankruptcy court properly granted the U.S. (IRS) summary judgment in allowing its claim. The bankruptcy court properly ruled that no portion of the IRS's claim was entitled to priority. The BAP analyzed the IRS's claim and determined that since it was a "non-pecuniary loss penalty," it was not a "tax" entitled to priority under 11 USC 507(a)(8).
Procedural context:
The 9th Circuit BAP reviewed entry of summary judgment by the U.S. Bankruptcy Court for the District of Nevada allowing the IRS's claim, but disallowing any designation of the claim as having priority under 11 USC 507(a)(8). Parties cross appealed the ruling granting summary judgment to the IRS in a suit brought by the liquidating trustee to disallow the IRS's claim.
The IRS filed a proof of claim, that it subsequently amended several times. It asserted an unsecured claim for approximately $2.2 million, with approximately $1.9 million being asserted as priority under 11 USC 507(a)(8). The IRS claim was based on its allegation that the debtor improperly deducted certain amounts in determining the amount of tax it owed in various years. The claim sought payment of the improperly deducted amounts.
Kirscher, Taylor, Jury

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