In re Hunt
United States Bankruptcy Court
95 BR 442 (1989)
- Written by Steven Pacht, JD
Facts
In February 1988, the Internal Revenue Service (IRS) assessed a deficiency against Nelson and Caroline Hunt (plaintiffs) regarding the Hunts’ 1982 taxes. The IRS claimed that the Hunts realized more than $380 million in income in 1982 from an entity that allegedly was a loan vehicle with no valid business purpose but that the Hunts contended was a valid partnership. The parties also disagreed regarding property valuations. The dispute did not involve complex computational issues. In May, the Hunts challenged the claimed deficiency in the United States Tax Court. In September, the Hunts filed petitions for Chapter 11 bankruptcy. The Hunts’ bankruptcy petitions automatically stayed their Tax Court case. The Hunts asked the bankruptcy court to exercise its discretion to resolve their IRS tax dispute. The IRS responded that the bankruptcy court should lift the automatic stay to permit the Tax Court to adjudicate the tax dispute because the underlying tax dispute involved complicated tax-law issues. The IRS further argued that there was a risk of a whipsaw effect if the bankruptcy court retained jurisdiction due to (1) the IRS’s pending case against the Hunts’ relatives, which, if litigated, would be decided by the Tax Court, and (2) the cost to the IRS of litigating the same issues in two different courts.
Rule of Law
Issue
Holding and Reasoning (Abramson, J,)
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