Supreme Court to Review Bankruptcy Case That Created Circuit Split

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The U.S. Supreme Court grants review to a bankruptcy case that addresses the treatment of the capital gains of post-petition sales in a Chapter 12 bankruptcy that created a split among the federal courts of appeals. In United States v. Hall, the Ninth Circuit held that Chapter 12 bankruptcy debtors could not treat the capital gains that arose from the post-petition sale of their farm as an unsecured claim not entitled to priority because the estate could not incur tax. The Ninth Circuit ruling conflicts with the Eighth Circuit ruling of Knudsen v. IRS, which held that income taxes arising from the post-petition sale of assets are unsecured claims and are dischargeable.