IRS Immune From State Fraud Transfer Claims, 7th Circ. Says

Law360, New York (February 5, 2014, 4:29 PM EST) -- The Seventh Circuit on Tuesday said the Internal Revenue Service could not be sued in a bankruptcy-related action to recoup an allegedly fraudulent federal tax payment, finding the IRS immune from such state law claims under the Bankruptcy Code.

In a unanimous opinion, Judge Joel M. Flaum said the Bankruptcy Code gives the IRS immunity to state fraudulent transfer lawsuits because of its unambiguous language, which clearly bars unsecured creditors from bringing such actions outside of bankruptcy.

“We decline [the] invitation to read an exception into...
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