Secured Creditors Liquidating Trust Denied Tax Refund for Net Operating Losses Based on Product-Liability Settlements and Pension Plan Contributions
by Eric L. Pruitt
Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C.; Birmingham, Ala.
The U.S. District Court for New Jersey recently considered the technical requirements for a taxpayer to successfully claim a specified liability loss (a type of net operating loss) under §172 of the Internal Revenue Code, 26 U.S.C. §101 et. seq. (I.R.C.). See Internal Revenue Service v. Harvard Secured Creditors Liquidating Trust, 2005 No. 02-50586, WL 2397224 (D. N.J. Sept. 28, 2005). Harvard Industries, Inc. filed a tax refund motion in June 2003 seeking a refund of payments that Harvard claimed were specified liability losses under I.R.C. §172(f). The payments at issue were amounts expended by Harvard in 1996 to settle product-liability claims relating to parts manufactured by its Elastic Stop Nut of America (ESNA) division; amounts contributed by Harvard to its pension plans as part of a settlement with the Pension Benefit Guaranty Corporation (PBGC) and workers’ compensation payments made by Harvard. As part of its bankruptcy case pending before the U.S. Bankruptcy Court for the District of New Jersey, Harvard confirmed its chapter 11 plan prior to the resolution of the tax-refund motion. Pursuant to the confirmed plan, which assigned certain assets and causes of actions to various trusts, the Harvard Secured Creditors Liquidation Trust became the party in interest for the tax-refund litigation.
Agenda for the 2006 Annual Spring Meeting
The Bankruptcy Taxation Committee will present a panel discussion at the Annual Spring Meeting in Washington, D.C., on Saturday, April 22, from 9:30 - 11:00 a.m. Speakers will include Gregory L. Germain, an assistant professor at Syracuse University College of Law, who will discuss his recent article “Income Tax Claims in the Year of Bankruptcy: A Congressional Created Quagmire;” Miriam A. Howe, assistant division counsel, and T. Keith Fogg, senior counsel, from the Small Business/Self-Employed Division of the Internal Revenue Service, who will discuss reorganization issues and the BAPCPA amendments; and Eric L. Pruitt of Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C., in Birmingham, Ala., who will discuss recent court decisions involving bankruptcy and tax law.
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