- 30 - Finally, under docket No. 23547-06L,5 petitioners challenge respondent’s application of the bankruptcy proceeds to the employment tax liabilities of Mr. Salazar instead of the joint tax liabilities of both petitioners. Because the distribution occurred after the bankruptcy proceeding was closed, and Mr. Salazar raised it during the hearing, we may review this issue. At the time of the bankruptcy trustee’s final report, respondent possessed: (1) A secured claim of $19,915.40 for petitioners’ 1997 and 1998 tax liabilities; (2) an unsecured priority claim of $43,673.45 for petitioners’ 1999 income tax liabilities and Mr. Salazar’s 1998, 1999, 2000, and 2001 employment tax liabilities; and (3) an unsecured general claim of $8,850.74. However, only payment on respondent’s $43,673.45 priority claim was allowed by the bankruptcy trustee. Respondent applied the $17,834.51 that was ultimately disbursed by the bankruptcy trustee on August 22, 2005, to the employment tax liabilities of Mr. Salazar that made up part of respondent’s priority claim. At first respondent applied the disbursement to the employment tax periods ending December 31, 1998, March 31, 1999, and June 30, 1999, in amounts that exceeded respondent’s priority claims for those periods. Eventually, respondent corrected this application of the proceeds to also 5The trustee had not filed his final report nor had any disbursements been made at the time of petitioners’ collection review hearing with respect to their joint liabilities.Page: Previous 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 NextLast modified: March 27, 2008