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Joseph Hill v. Raquel King

Summarizing by J Newman

Dreyfuss v Cory (In the Matter of Sheldon H. Cloobeck)

Citation:
9th Cir. No. 13-15432 (June 12, 2015)
Tag(s):
Ruling:
Chapter 7 trustee must obtain a court order authorizing the payment of federal income taxes as an administrative expense under § 503(b), after notice to creditors. Creditors' objection to Final Report was sustained where the Trustee failed to obtain such an order prior to paying the taxes. The 9th Circuit remanded the case with directions that the bankruptcy court determine the amount of federal income taxes due from the estate, and conduct such other proceedings as may be appropriate.
Procedural context:
The 9th Circuit reversed the district court’s affirmance of the bankruptcy court’s order approving the chapter 7 trustee’s final report following the trustee’s payment of the federal income taxes of the bankruptcy estate.
Facts:
On or about May 13, 2009, the Trustee paid $340,895 of estate funds to the IRS to satisfy the estate’s 2005 federal income tax liability. The Trustee did not give notice, or seek a hearing, before making the 2005 tax payment, nor did the bankruptcy court authorize the payment of 2005 taxes before the Trustee made that payment. The Trustee made reference to the fact that he paid such taxes in his status report but did not disclose the amount. On May 9, 2012, the Trustee filed the Final Report with the bankruptcy court. The Appellant filed an opposition, and the bankruptcy court held a hearing, but declined to evaluate the amount of the 2005 taxes. The court found that there was “sufficient evidence to find that the Trustee acted responsibly and reasonably with respect to filing the tax returns of the estate.” The district court affirmed, but the Ninth Circuit reversed.
Judge(s):
J. Clifford Wallace, Milan D. Smith, Jr., and Paul J. Watford, Circuit Judges.

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