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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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