TAG Tax

Contact: Berger Singerman (Florida, USA)

This Tax Alert discusses the recent Third Circuit Court of Appeals Court case, In Re: The Majestic Star Casino, LLC, et. al., 2013 WL 2162781 (CA 3 5/21/2013), which vacated the Bankruptcy Court’s January 24, 2012 order, involving a non-debtor S corporation (“Parent Corporation”) which revoked its S corporation status, thereby causing the automatic revocation of the “qualified Subchapter S corporation” (“QSUB”) status of its wholly-owned subsidiary (“Subsidiary”) which was a debtor in a Chapter 11 bankruptcy case. The principal issue in that case is whether the Parent Corporation’s revocation of its S corporation status, which by operation of tax law caused the revocation of its Subsidiary’s QSUB status, constitutes an avoidable postpetition transfer of “property of the bankruptcy estate” under Section 549 of the Bankruptcy Code, as well as a violation of the Bankrtupcy Code’s automatic stay under Section 362 of the Bankruptcy Code.

Read the entire alert.