United States District Court, Northern District of Illinois, E.D
December 11, 1968
IN THE MATTER OF HALO METAL PRODUCTS CO., INC.
The opinion of the court was delivered by: Campbell, Chief Judge.
MEMORANDUM AND ORDER
This matter comes before the court on the petition of the
government to review the decision of the Referee in Bankruptcy
refusing to declare certain funds of the bankrupt a trust for the
United States. The funds in question are withholding taxes
withheld from wages of the employees of the debtor, but not paid
over to the United States.
In its petition for review the government argues that under §
7501(a) of the Internal Revenue Code (26 U.S.C. § 7501(a)) when
one is required to collect taxes from another and to subsequently
pay the taxes collected to the government, those monies collected
constitute a trust for the benefit of the United States. The
Referee found that all
priorities in bankruptcy matters should be determined pursuant to
§ 64(a) of the Bankruptcy Act (11 U.S.C. § 104) and that the
trust fund concept of § 7501(a) should not be interpreted to
change the scheme of priorities in the Bankruptcy Act. The
government's position is supported by a number of court
decisions. City of New York v. Rassner, 2nd Cir., 127 F.2d 703
(1942); United States v. Sampsell, 9th Cir., 193 F.2d 154 (1951);
In re Airline-Arista Printing Corp. (S.D.N.Y., 1957) 156 F. Supp. 403.
These decisions, however, have been criticized by a number
of more recent authorities. United States v. Kalishman, 8th Cir.,
346 F.2d 514 (1965); In re Connecticut Motor Lines, Inc., 3rd
Cir., 336 F.2d 96 (1964); 3A Collier on Bankruptcy § 64.02, n. 27
at p. 2070. See also Nicholas v. United States, 384 U.S. 678, 86
S.Ct. 1674, 16 L.Ed.2d 853 (1966). They have also been expressly
and unequivocally rejected by a recent District Court opinion. In
re Green (D.C.Colo., 1967) 264 F. Supp. 849.
For the reasons set forth in these more recent authorities, I
find that the order of the referee in bankruptcy here certified
for review should be and the same is hereby affirmed.
© 1992-2003 VersusLaw Inc.