Oren L. Benton - Page 22

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          346(i)(2) of the Bankruptcy Code and its relationship to section            
          1398(i).  The Court of Appeals found significant the following              
          language contained in section 346(a) of the Bankruptcy Code:                
          “Except to the extent otherwise provided for in this section,               
          subsections (b), (c), (d), (e), (g), (h), (i), and (j) of this              
          section apply notwithstanding any State or local law imposing a             
          tax, but subject to the Internal Revenue Code of 1986.”                     
               The Court of Appeals for the Sixth Circuit reasoned that the           
          phrase “subject to the Internal Revenue Code” in section 346(a)             
          of the Bankruptcy Code contemplated that the Bankruptcy Code                
          sections had no effect on the Federal tax laws, and that                    
          subsection (a) applies “‘only to state and local laws’”.  Firsdon           
          v. United States, supra at 446 (quoting In re Page, 163 Bankr.              
          196, 197-198 (Bankr. D. Kan. 1994)).  The Court of Appeals also             
          referenced the legislative history and noted that “a potential              
          jurisdictional conflict” existed resulting in a “compromise * * *           
          whereby the tax provisions [of Bankruptcy Code section 346(i)]              
          were made ‘inapplicable to Federal taxes,’ in the hope that                 
          comparable federal provisions would be enacted during the                   
          subsequent (96th) Congress.”  Id. at 447 (quoting H. Rept. 95-              
          595, at 3 (1977)).  It also explained:                                      
               although I.R.C. sec. 1398(i) follows 11 U.S.C. sec.                    
               346(i)(2) in providing for the succession of a                         
               bankruptcy estate’s tax attributes for federal tax                     
               purposes, it does not contain any of the tolling                       
               language found in the second sentence of sec.                          
               346(i)(2). [Id.]                                                       

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