Feiler

This case presents a conflict between provisions of the Bankruptcy Code and the Internal Revenue Code. Under Internal Revenue Code § 172, a taxpayer’s election to forego a net operating loss carryback is “irrevocable.” Under Bankruptcy Code § 548, a bankruptcy trustee may avoid “any transfer” of an interest of the debtor in property when made under conditions set forth in the statute as a fraudulent transfer. In this case, a trustee sought to avoid as fraudulent an election to forego a net operating loss carryback. The issue is whether bankruptcy law trumps the tax code or vice versa. We hold that a bankruptcy trustee’s § 548 avoidance powers take precedence over the otherwise irrevocable nature a § 172 election, and therefore, that a trustee may avoid such a tax election as a fraudulent transfer. The decisions of the Bankruptcy Appellate Panel and the bankruptcy court are affirmed.

I. Facts

The facts of this case are undisputed. In October of 1994, James and Carol Feiler filed a properly-extended federal tax return for the 1993 tax year reflecting net operating losses (“NOLs”) of $971,930. Under the tax code in effect in 1993, a taxpayer had two choices for dealing with NOLs.…