IN THE MATTER OF SHELDON H. CLOOBECK, Debtor, GILBERT DREYFUSS, Appellant,
TIMOTHY S. CORY, Chapter 7 Trustee, Appellee
Argued and Submitted, San Francisco, California March 13, 2015.
Counsel Corrected June 12, 2015.
Appeal from the United States District Court for the District of Nevada. D.C. No. 2:12-cv-01506-LRH-NJK. Larry R. Hicks, District Judge, Presiding.
The panel 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.
The panel held that the bankruptcy estate's federal income tax liability is an administrative expense, and so 11 U.S.C. § 503(b) requires a chapter 7 trustee to provide notice to creditors, and obtain a hearing, before paying taxes incurred by the estate. The panel remanded the case to the district court for remand to the bankruptcy court 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.
Concurring, Judge Wallace agreed that the trustee did not follow section 503(b)'s requirement that the income tax payment be made only " after notice and a hearing." He wrote separately to highlight for the court on remand his concerns about the timeliness of a creditor's objection to the tax payment.
David S. Kupetz (argued), SulmeyerKupetz, Los Angeles, California, for Appellant.
Duane H. Gillman (argued) and Timothy S. Cory, Durham Jones & Pinegar, P.C., Las Vegas, Nevada, for Appellee.
Before: J. Clifford Wallace, Milan D. Smith, Jr., and Paul J. Watford, Circuit Judges. Opinion by Judge Milan D. Smith, Jr.; Concurrence by Judge Wallace.
M. SMITH, Circuit Judge:
In this bankruptcy appeal, we consider whether section 503 of the Bankruptcy Code, 11 U.S.C. § 503(b), requires a chapter 7 trustee to provide notice to creditors, and obtain a hearing, before paying taxes incurred by the estate. The Appellee, a chapter 7 trustee, paid the 2005 federal income taxes of a bankruptcy estate without first providing notice to the Appellant, a creditor of the estate, requesting a hearing to determine the appropriate amount of those taxes, or obtaining an order of the bankruptcy court authorizing the payment of those taxes. The Appellant contends that the bankruptcy court erred by approving the Trustee's Final Report without holding a hearing to determine the appropriate amount of the 2005 federal income taxes, and without approving the payment of those taxes. The Appellee argues that construing the ...