SCOTUS Grants Cert. for Chapter 12 Tax Case

The Supreme Court granted certiorari to hear an appeal from a Ninth Circuit case involving whether a Chapter 12 debtor could essentially trap capital gains taxes in a Chapter 12 estate, and therefore, not have to pay all of the capital gains taxes. The name of the case is Hall v. U.S. and the Supreme Court case number is 10-895.

After filing a Chapter 12 bankruptcy, the debtors sold their farm for $960,000, incurring a capital gains tax of $29,000. They then sought to treat the capital gains taxes as unsecured debt incurred by the Chapter 12 estate. The lower court had authorized this treatment of the debt, but the Ninth Circuit reversed. It is noteworthy that the Supreme Court granted certiorari. The probable reason that certiorari was granted is to resolve a split in the circuits. Currently, the Eighth Circuit has ruled contrary to this, as has the Tenth Circuit Bankruptcy Appellate Panel.