On May 14, 2012, the Supreme Court announced its decision in Hall v. United States. The question in this case was whether capital gains tax liability resulting from individual debtors’ sale of a farm during the course of a Chapter 12 bankruptcy was a tax liability “incurred by the estate,” and for that reason could be treated by statute as an unsecured liability dischargeable in the bankruptcy proceedings.
In an opinion authored by Justice Sotomayor, the Court held by a vote of 5-4 that the capital gains taxes were not “incurred by the estate,” and thus were neither collectible nor dischargeable in Chapter 12 bankruptcy proceedings. Justice Sotomayor’s opinion was joined by Chief Justice Roberts and Justices Scalia, Thomas, and Alito. Justice Breyer filed a dissenting opinion, which was joined by Justices Kennedy, Ginsburg, and Kagan.
To discuss the case, we have Andy Grewal, who is an Associate Professor of Law at the University of Iowa College of Law.