Trustee Cleared by 10th Circuit to Claw Back Tax Dollars (Correct)

A Chapter 7 Trustee was within his rights to sue the Internal Revenue Service to claw back funds fraudulently transferred by a bankrupt transportation company on behalf of its principals, the 10th Circuit ruled Tuesday.

The bankruptcy code waives the IRS’ sovereign immunity from the Chapter 7 trustee’s lawsuit to claw back a debtor’s fraudulent transfer to the tax agency, the appellate court said.

The dispute stemmed from the 2017 bankruptcy of All Resorts Group Inc. In 2014, the company paid $145,000 in “personal tax debts” of its principals to the IRS.

The Chapter 7 Trustee sued the IRS in ...