Schatz

The principal issue in this appeal is when state income tax deficiencies are “assessed” for federal bankruptcy discharge purposes under 11 United States Code section 507 (a)(8)(A)(ii) and (iii). (This federal statute, together with 11 United States Code section 523 (a)(1)(A), generally specifies that income taxes that are assessed within 240 days of filing of a bankruptcy petition or are assessed after the petition is filed are not dischargeable.) (See In re King (9th Cir. 1992) 961 F.2d 1423, 1424 (King).)

We disagree with the trial court regarding the assessment date, We conclude, in line with King, that a state income tax deficiency is assessed for bankruptcy discharge purposes when the assessment contained in a notice of proposed deficiency assessment becomes final, either through the passage of time or at the end of an appeal period. This is the point at which the state, the taxing sovereign, has formally acted to finally fix the tax liability. Consequently, we reverse the summary judgment for the plaintiffs that was based on the trial court’s determination that the taxes at issue were dischargeable. We direct the trial court to enter summary judgment for the…