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Bankruptcy Litigation Tax

Stipulation That Resolves Entire Amount Must Reflect Intent of Parties

The Ninth Circuit recently affirmed a lower courts’ rulings that a stipulation between the IRS and a bankruptcy trustee, which allowed the IRS’s priority tax claim, did not prevent the IRS from collecting nondischargeable tax debt above the agreed amount in that stipulation.

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It arguably goes without saying that when entering into a stipulation or any settlement in a bankruptcy proceeding that purports to resolve the entire amount and treatment of a claim, the terms of such agreement must fully and clearly reflect the intent of the parties. This is particularly true in connection with nondischargeable priority tax claims, as demonstrated in a recent U.S. Court of Appeals for the Ninth Circuit decision. See, Minor v. United States (In re Minor), No. 21-55360 (9th Cir. Apr. 18, 2022). In Minor, the Ninth Circuit affirmed the lower courts’ rulings that a stipulation between the IRS and a bankruptcy trustee, which allowed the IRS’s priority tax claim, did not prevent the IRS from collecting nondischargeable tax debt above the agreed amount in that stipulation.

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