Page 671 - TaxAdviser_2022

TAX TRENDS
Author:
James A. Beavers, CPA, CGMA,
J.D., LL.M.
An automatic stay
in Tax Court is
not lifted by the
confirmation of a
bankruptcy plan;
the Tax Court enters
a new decision in
a case despite an
ambiguous appellate
court mandate.
62 December 2022
Analysis of and reflections on
recent cases and rulings.
bankruptcy court’s confirmation of
Bankruptcy & Insolvency their bankruptcy plan terminated the
automatic stay.
Automatic stay not
terminated by confirmation The Tax Court’s decision
of bankruptcy plan The Tax Court held that the bankrupt-
An automatic stay in a Tax Court case cy court’s confirmation of the Cochrans’
triggered by a taxpayer’s filing of a bankruptcy plan did not terminate the
Chapter 11 bankruptcy petition is not automatic stay in their Tax Court case.
terminated by the bankruptcy court’s A bankruptcy filing generally trig-
confirmation of the taxpayer’s bank- gers an automatic stay of Tax Court
ruptcy plan. proceedings concerning the debtor-
taxpayer under 11 U.S.C. Section
Background 362(a)(8). Under 11 U.S.C. Section
The IRS issued married taxpayers 362(c)(2), this automatic stay is gener-
ally lifted at “the earliest of ” the closing
Daniel and Kelley Cochran a notice
of deficiency for their 2011 tax year in of the bankruptcy case, the dismissal
2016. The Cochrans timely filed a peti- of the bankruptcy case, or the granting
tion with the Tax Court challenging or denial of a discharge to the debtor.
the IRS’s determinations.
The Cochrans and the IRS agreed that
In February 2017, the Cochrans the Cochrans’ bankruptcy case had not
filed a Chapter 11 bankruptcy petition. been closed or dismissed. Therefore, the
question before the court was whether
In April 2017, the Cochrans informed
the Tax Court that they had filed for the bankruptcy court’s confirmation of
bankruptcy, and the proceedings in the the Cochrans’ Chapter 11 bankruptcy
Tax Court with respect to their case plan acted to grant a discharge, or as a
were subsequently automatically stayed denial of a discharge, to the couple for
under 11 U.S.C. Section 362(a)(8). purposes of terminating the automatic
In July 2019, the bankruptcy court stay in their Tax Court case.
confirmed the Cochrans’ Chapter 11 The Cochrans relied primarily on
plan, but the Cochrans had not com- the Tax Court’s decision in Moody,
pleted all payments pursuant to the 95 T.C. 655 (1990), to support their
plan and their bankruptcy case had not position. In Moody, the Tax Court held PHOTO BY ARCHEOPHOTO/ISTOCK
been closed or dismissed. Although that a bankruptcy court’s confirmation
the Cochrans’ bankruptcy case was still of the taxpayer’s Chapter 11 bankruptcy
pending, they filed a motion to lift the plan served to effectively discharge or
stay of proceedings, arguing that the deny discharge to the taxpayer-debtor
The Tax Adviser