Did conversion of a corporation's Chapter 11 case to a closed no-asset Chapter 7 case discharge its petitioned California sales-tax liability?

Plain-English summary

The corporation's no-asset Chapter 7 case did not discharge its petitioned California sales-tax liability.

The memorandum read 11 U.S.C. section 727(a) as denying Chapter 7 discharge when the debtor is not an individual. Because the taxpayer was a corporation, closing the converted no-asset case did not eliminate the liability.

Staff recommended that the Board continue processing the timely petition for redetermination and use its normal procedures if the corporation stopped cooperating. The source did not decide whether the assessment was correct.

Common questions

Did the no-asset status discharge the corporate tax debt?

No.

Could the Board continue the appeal?

Yes, according to the memorandum.

Did the opinion resolve the tax amount?

No.

Citations and references

• 11 U.S.C. section 727(a) — corporate debtor ineligible for Chapter 7 discharge under the memorandum's analysis

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/170-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/170-0006-100.pdf

Original ruling text

State of California

Board of Equalization
Legal Division-MIC: 82

Memorandum

To :

Mr. Steve Adams
Supervising Tax Auditor, Petitions Section

From :

Thomas J. Cooke
Tax Counsel

Subject:

M--- M---/C---, Inc.
Permit No. SR -- XX-XXXXXX-010

170.0006.100

Date:

August 18, 1997

Telephone:

(916) 445-6496
CalNet 485-6496

Gary Jugum has requested that I respond to your memorandum to him dated August 11, 1997 concerning the above taxpayer. In your memorandum, you state that a Notice of Determination was issued to the taxpayer on December 10, 1996 for the period July 1, 1992 to September 30, 1995. A timely petition for redetermination was filed on December 24, 1996. On May 31, 1996, the taxpayer filed Chapter 11 bankruptcy. The case was converted to a no-asset Chapter 7 bankruptcy. The San Jose District Office states that the no-asset case was closed on March 14, 1997. You ask if the petitioned liability is subject to discharge and whether the case should proceed to an appeals conference. 11 U.S.C. section 727(a) provides that the bankruptcy court shall grant the debtor a discharge unless the debtor is not an individual. This corporate taxpayer cannot discharge its sales tax liability in a Chapter 7 no-asset case. It is our recommendation that the Board proceed with the taxpayer’s petition. If the taxpayer chooses not to cooperate in the Appeals process, the Board should implement its usual procedures.

TJC/cmm
Attachments
cc:

San Jose District Administrator (GH)