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Nicolas v. United States, 384 U.S. 678 (1966)
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General SummaryThis case is from a collection containing the full text of over 16,000 Supreme Court cases from 1793 to the present. The body of Supreme Court decisions are, effectively, the final interpretation of the Constitution. Only an amendment to the Constitution can permanently overturn an interpretation and this has happened only four times in American history.
Nicolas v. United States, 384 U.S. 678 (1966)
Nicolas v. United States No. 650 Argued April 19, 1966 Decided June 13, 1966 384 U.S. 678
CERTIORARI TO THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
Syllabus
A corporation filed a petition for an arrangement with unsecured creditors under Chapter XI of the Bankruptcy Act. While operating its business as a debtor in possession, the corporation withheld federal income and social security taxes, and collected cabaret excise taxes. It then filed a petition in bankruptcy, and was adjudged a bankrupt. Petitioner, who was appointed trustee in bankruptcy, did not pay the taxes when they later became due, nor did he file the required tax return. The Government filed an administrative expense statement in the bankruptcy proceeding claiming the principal of the taxes due plus penalties and interest. The referee allowed the claim for taxes, but denied the claims for penalties and interest, and the District Court affirmed. The Court of Appeals reversed, and allowed the claims for penalties and interest.
Held:
1. The United States is not entitled to interest in this case. Pp. 682-692.
(a) Sexton v. Dreyfus, 219 U.S. 339, and New York v. Saper, 336 U.S. 328, establish that interest is suspended once an enterprise enters a period of bankruptcy administration beyond that in which the underlying interest-bearing obligation was incurred. P. 685.
(b) Where taxes have been incurred during the Chapter XI proceeding itself, the above principle permits interest to accrue during the arrangement proceeding, but requires that it be suspended once the bankruptcy petition is filed. P. 686.
2. The United States is entitled to payment of the penalties. Pp. 692-696.
(a) The trustee in bankruptcy, as representative of the bankrupt estate and successor in interest to the debtor in possession, was, under 26 U.S.C. § 6011(a), obligated to file returns for the taxes even though incurred by the debtor in possession during the pendency of the arrangement proceeding. Pp. 692-693.
(b) Under Boteler v. Ingels, 308 U.S. 57, the United States is entitled, in the circumstances of this case, to exact the penalties as a legitimate means of enforcing the prompt filing of the tax returns. Pp. 693-695.
346 F.2d 32 affirmed in part, reversed in part, and remanded.
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Chicago: U.S. Supreme Court, "Syllabus," Nicolas v. United States, 384 U.S. 678 (1966) in 384 U.S. 678 384 U.S. 679. Original Sources, accessed November 24, 2024, http://originalsources.com/Document.aspx?DocID=8VUACGTFT7QAPHA.
MLA: U.S. Supreme Court. "Syllabus." Nicolas v. United States, 384 U.S. 678 (1966), in 384 U.S. 678, page 384 U.S. 679. Original Sources. 24 Nov. 2024. http://originalsources.com/Document.aspx?DocID=8VUACGTFT7QAPHA.
Harvard: U.S. Supreme Court, 'Syllabus' in Nicolas v. United States, 384 U.S. 678 (1966). cited in 1966, 384 U.S. 678, pp.384 U.S. 679. Original Sources, retrieved 24 November 2024, from http://originalsources.com/Document.aspx?DocID=8VUACGTFT7QAPHA.
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