Bankruptcy Court Lacks Jurisdiction to Determine Tax Penalties

Insufficient assets to pay tax penalties in a Chapter 7 bankruptcy estate will prevent a bankruptcy court from determining penalty amounts (In re Bush, 2016 BL 261560, S.D. Ind., 1:15-cv-1318-WTL-DKL, 8/12/16).

Judge William T. Lawrence of the U.S. District Court for the Southern District of Indiana on Aug. 12 found that the bankruptcy court lacked jurisdiction to decide the amount of tax penalties owed because there were insufficient assets in the bankruptcy estate to pay any such penalties, which, according to priorities established in the Bankruptcy Code, are paid only after unsecured claims are satisfied in full. ...