Case: Tax Lien Covering Penalties Avoidable in Bankruptcy (Bankr. D. Ariz.) (IRC §6321)

Trustee may avoid an IRS tax lien for penalties for the benefit of the estate pursuant to 11 U.S.C. Section 551 and after avoidance the IRS holds an unsecured claim against the debtor in the amount of the avoided tax lien, a bankruptcy court held in granting the trustee’s motion for summary judgment. The IRS had filed a lien against Debtor’s property for the 2015 tax year. While the lien was satisfied the penalty amount remained. The pre-bankruptcy tax lien was recorded by the IRS and it now holds a 2nd (but involuntary) lien position against the property. The IRS ...