US Supreme Court to Rule on Whether Code Section 1146's Transfer Tax Exemption May Ever Apply to Pre-Confirmation 363 Sales
6/16/08 Update: Here's a link to my post on the Court's decision reversing the 11th Circuit's decision.
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Bankruptcy lawyers and bloggers eyeing the Supreme Court's docket this term had to be concerned at the absence of any bankruptcy cases on the Court's docket after two straight banner years of bankruptcy decision-making. Thankfully, the Court on Friday granted the State of
The issue facing the Court is one that has split the circuits, and asks:
Does Code section 1146, which exempts sales under a confirmed plan from state and transfer taxes, apply to pre-confirmation sales of assets under Section 363?
At first blush, the answer seems obvious given that Section 1146 on its face is limited to transfers "under a plan confirmed under section 1129 of this title." But just to show you how creative bankruptcy lawyers—and judges—can get, the Eleventh Circuit agreed with the argument that the Section 1146 exemption "may apply to those pre-confirmation transfers that are necessary to the consummation of a confirmed plan of reorganization, which, at the very least, requires that there be some nexus between the pre-confirmation transfer and the confirmed plan." State of
One small problem for the respondents, and Bingham McCutcheon's Eric Brunstad, who represents the respondent-debtor; that is, Hechinger was decided by none other than then-Judge, now-Justice Alito, the author of the two latest bankruptcy opinions decided by the Supreme Court (i.e., Travelers & Marrama). I think that it's fair to say that reversal of the Eleventh Circuit's decision is about as safe a bet as you'll find.
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Note: The inset picture is a famous pre-Revolutionary War political cartoon depicting "Bostonians paying the excise-man by tarring and feathering." Ahh, the good ol' days!
© Steve Jakubowski 2007