Holywell Corp. v. Smith,
503 U.S. 47 (1992)

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No.90-1361. Argued December 4, 1991-Decided February 25,1992*

Petitioner debtors, four affiliated corporate entities and Theodore B.

Gould, filed Chapter 11 bankruptcy petitions after one of the entities defaulted on a real estate loan. The Bankruptcy Court consolidated the cases and the debtors represented their own bankruptcy estates as debtors in possession. Creditors approved a Chapter 11 plan that provided, inter alia, for placement of the debtors' property into a trust and appointment of a trustee to liquidate all of the trust property and to distribute it to the creditors of the various bankruptcy estates. The plan said nothing about whether the trustee had to file income tax returns or pay any income tax due, but the United States did not object to the plan's confirmation. The plan took effect in October 1985. One of the corporate debtors filed a tax return for the fiscal year ending July 31, 1985, including as income capital gains earned in the postbankruptcy sale of certain properties in its estate, but requested respondent Smith, the appointed trustee, to pay the taxes owed. Neither the corporate debtors nor Smith filed income tax returns for succeeding fiscal years, in which there was capital gains and interest income. Over the objections of the United States and the debtors, the Bankruptcy Court granted Smith's request for a declaratory judgment that he had no duty under the Internal Revenue Code (Code) to file income tax returns or pay income taxes. Both the District Court and the Court of Appeals affirmed.

Held: Smith is required by the Code to file income tax returns and pay taxes on the income attributable to the property of both the corporate debtors and Gould. Pp. 52-59.

(a) Smith is an "assignee" of "all" or "substantially all" of the "property ... of a corporation" and therefore is required by § 6012(b)(3) of the Code to file returns that the corporate debtors would have filed had their property not been assigned to him. The plan transferred the corporate debtors' estates to Smith as trustee, and it is undisputed that he meets the usual definition of the word "assignee" in both ordinary and legal usage. Nothing in § 6012(b)(3) limits the definition of an "as-

*Together with No. 90-1484, United States v. Smith et al., also on certiorari to the same court.



signee" to persons who wind up a dissolving corporation or manage the day-to-day business of a distressed corporation. Pp. 52-54.

(b) With respect to the income attributable to Gould's property, Smith is required by § 6012(b)(4) to make a return not, as the United States argues, because he is the "fiduciary" of the "estate ... of an individual," but because he is the "fiduciary" of a "trust." Since the plan declared and established a separate and distinct trust and vested the property of Gould's estate in Smith, it did not simply substitute Smith for Gould as the fiduciary of Gould's "estate." However, the trust here-which the plan described as a trust and created for the express purpose of liquidating Gould's estate and distributing it to creditors-clearly fits the description of a liquidating trust in 26 CFR §301.7701-4(d). Moreover, when the plan assigned the property of Gould's estate to Smith, it gave him powers consistent with the definition of "fiduciary" in § 7701 (a)(6) of the Code and 26 CFR §301.7701-6. Respondents' argument that it is Gould who must pay the trust's taxes under the Code's "grantor trust" rules is rejected. In re Sonner, 53 B. R. 859, distinguished. Also rejected is their contention that Smith lacked sufficient discretion in performing his duties under the plan to be a fiduciary, since the liquidating trust is a trust under the Code and Smith's duties satisfy the regulations' description of a fiduciary. Pp. 54-58.

(c) Respondents also err in asserting that Smith may ignore the duties imposed by the Code because the plan does not require him to pay taxes. Section 1141(a) of the Bankruptcy Code-which states that "the provisions of a confirmed plan bind ... any creditor" -does not preclude the United States from seeking payment of any taxes. Even if § 1141(a) binds creditors with respect to claims that arose before confirmation, it does not bind them with regard to postconfirmation claims. Cf. 11 U. S. C. § 101(10). Here, the United States is not seeking taxes due prior to Smith's appointment, but is merely asserting that Smith, after his appointment, must make tax returns in the same manner as the assignee of the property of any corporation or the trustee of any trust. Pp.58-59.

911 F.2d 1539, reversed.

THOMAS, J., delivered the opinion for a unanimous Court.

Kent L. Jones argued the cause for the United States in No. 90-1484 and petitioners in No. 90-1361. With him on the briefs for the United States were Solicitor General Starr, Assistant Attorney General Peterson, Deputy Solicitor General Wallace, Gary D. Gray, and Francis M. Allegra.

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