In re Dawes, (Bkrtcy.D.Kan.)

Plans - Capital gains tax arising from postpetition sale of farm real property may be denied full payment in a Chapter 12 plan.

Under 1222(a)(2)(A) of the Bankruptcy Code, the debtors' Chapter 12 plan could treat the Internal Revenue Service's (IRS') postpetition capital gains tax claim incurred as a result of the IRS' forced sale of the debtors' farm real property as an unsecured claim not entitled to priority, limited by the condition that such treatment was allowed only if the debtors received a discharge, a Kansas bankruptcy court has held, recognizing a split of authority. The capital gains taxes at issue were not priority taxes under 507(a)(8) of the Code, and, even though the estate was not itself a separate taxable entity, the taxes were "incurred by the estate" within the meaning of 503(b)(1)(B)(i), as the tax liability arose after the creation of the debtors' estate.

Date of decision: 2/11/08

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