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Petitioner argues the Internal Revenue Service has a
contemporaneous right to the payment of taxes as income is
earned. As a result, petitioner contends that respondent had a
prepetition “claim” under 11 U.S.C. sec. 362(a)(6), for taxes
generated from income earned from January 1, 2004, through the
date petitioner filed a petition with the bankruptcy court on
April 7, 1994. Thus, in petitioner’s view the October 9, 1995,
assessment of petitioner’s 1994 tax liability, as it pertains to
the income earned before the petition was filed, violated the
automatic bankruptcy stay.6
Federal income tax generally is incurred, and liability
established, on the last day of the taxable year. Towers v.
United States (In re Pac.-Atl. Trading Co.), 64 F.3d 1292, 1298
(9th Cir. 1995). Petitioner filed his bankruptcy court petition
on April 7, 1994. The Government’s claim to petitioner’s 1994
income tax liability arose no earlier than December 31, 1994.
Thus, because the claim to the tax liability arose after the
commencement of the case in bankruptcy, the assessment of
6 If a debtor makes a sec. 1398(d)(2) election, his tax
liability for the first short taxable year becomes an allowable
claim against the bankruptcy estate as a claim arising prior to
the bankruptcy filing. In the absence of a sec. 1398(d)(2)
election, the debtor’s tax liability for the entire year in which
the bankruptcy proceeding commences is collectible directly from
the debtor individually, with no portion being collectible from
the bankruptcy estate. See Katz v. Commissioner, 116 T.C. 5, 16-
17 (2001), revd. on other grounds 335 F.3d 1121 (10th Cir. 2003).
Petitioner did not elect to split the 1994 taxable year under
sec. 1398(d)(2).
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