Section 6.6 Tax and Other “Trust Fund” Transfers

• Library: Bankruptcy Practice (2007 Ed. + 2015 Cum Supp)

3. (§6.6) Tax and Other “Trust Fund” Transfers

Corporate debtors often make late payments of payroll or other “trust fund” taxes to protect officers, directors, and other responsible parties from personal liability relating to unpaid taxes under provisions such as I.R.C. § 6672(a). When these payments occur, a trustee may seek recovery of the payments from the taxing authority or the benefited insiders.

As to trust fund taxes collected or withheld by the debtor, the Supreme Court has held that the amount of taxes payable, rather than the actual money collected, is considered to be held in...