Case Summary:
Court interprets ambiguous trustee appointment order of October 28, 1986, as placing sole responsibility for the collection, recording and paying of payroll taxes on the debtor corporations' "agent" Paul Hemker.  The trustee, Melvin Hoffman, was therefore not responsible for collecting, recording and paying those taxes.

Assuming the trustee to be a "responsible person" pursuant to 26 U.S.C. § 6672, he is not entitled to indemnification from the bankruptcy estate for any payments made for a 100% penalty assessed pursuant to that provision.  Citing Levit v. Ingersoll Rand Financial Corp., 874 F.2d 1186 (7th Cir. 1989).

Payments made by trustee as a "responsible person" pursuant to 26 U.S.C. § 6672 to satisfy 100% penalty do not constitute administrative expense under 11 U.S.C. § 503(b)(1)(a).  11 U.S.C. § 346(f) obligates trustee to withhold from wage claims any amount required under applicable federal tax law.  Result is not changed by fact that trustee was able to collect substantial amount ($160,000) for payment to holders of unsecured and administrative claims.

Post conversion payments made for 100% tax penalty pursuant to 11 U.S.C. § 6672 are not entitled to administrative super priority status under 11 U.S.C. § 726(b).  Court's finding that payments were not entitled to administrative expense status under 11 U.S.C. § 503(b) mandates this result.

Statue/Rule References:
11 U.S.C. § 346(f) -- Trustee Tax Withholding Obligations
11 U.S.C. § 503 -- Administrative Expenses
26 U.S.C. § 6672 -- "Responsible Person" - Tax Withholding

Key Terms:
Administrative Expenses
Taxes
Taxes - Penalties