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The Supreme Court held that the 1992 income tax liability
was not discharged because the taxpayers’ chapter 13 bankruptcy
petition of May 1, 1996, tolled the lookback period. Id. at 54.
The Court explained that limitations periods, such as the
lookback period under 11 U.S.C. sec. 507(a)(8), traditionally are
subject to principles of equitable tolling and that neither
section 523 nor section 507 of the Bankruptcy Code contains
language indicating that Congress intended to preclude equitable
tolling. Id. at 48-53. When the taxpayers filed the chapter 13
petition, the automatic stay of Bankruptcy Code section 362(a)
prevented collection of their 1992 income tax liability. Id. at
46. Without the application of equitable tolling, a voluntary
dismissal of the chapter 13 petition after the lookback period
has expired, followed by the filing of a chapter 7 petition,
could be used by taxpayers as a strategy to discharge their
income tax liability. Id.
Applying equitable tolling to the present case, we must
conclude that petitioner’s chapter 7 bankruptcy discharge did not
relieve her of the 1995 income tax liability. When petitioner
filed the chapter 13 bankruptcy petition on January 28, 1997, the
lookback period was tolled until the dismissal of the chapter 13
petition on March 11, 1999. As of petitioner’s chapter 7 filing
on July 27, 1999, the lookback period of section 507(a)(8)(A)(i)
of the Bankruptcy Code remained open so as to prevent discharge
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