United States v. Irving I. Bass, Trustee in Bankruptcy of the Estate of Leland Cameron, Bankrupt

On November 14, 1955, a petition in bankruptcy was filed against Leland Cameron, doing business as Allied Aircraft Company. Prior thereto, on August 31, 1955, the District Director of Internal Revenue had assessed unpaid withholding and F.I.C.A. taxes against the bankrupt, and notice of the assessment, with demand for payment, was made on September 8, 1955.

By July 9, 1958, the trustee had paid the entire principal amount owing on the tax lien, together with interest accruing to the date of bankruptcy.

In addition to these amounts, the United States claimed interest from the date of bankruptcy to the date of payment of the principal amount of the claim. The referee allowed the interest over the objection of the trustee, who petitioned the District Court for review. The District Court reversed the referee’s order to the extent the referee had allowed interest after the date of bankruptcy on the tax lien claim. The Government appeals.

The only question on this appeal is whether the United States is entitled to post-bankruptcy interest on a tax claim supported by a lien prior to the filing of the petition in bankruptcy.

The general rule holds that interest does not accrue after…