PEARSON, Bankruptcy Judge
The bankrupt's estate, having been fully administered and ready for distribution, was liable for tax penalties incurred after the filing of this Chapter XI proceeding, but was not liable for post-petition interest. See Sec. 64(a)(1) at ¶ 2625 and Sec. 507(a)(1) at ¶ 9027.
[Digest of Opinion]
The issue in this case was whether post-petition taxes and penalties, which accrued during an aborted Chapter XI, were allowable as an expense of administration and payable as a priority.
The court, turning to the case law, cited In re Chapman, 394 F.2d 340 (2d Cir. 1968), which holds "that the estate of the bankrupt is liable for penalties incurred on post-petition taxes as well as interest on the penalties up to the date of adjudication." Further, in Nicholas v. U.S., 384 U.S. 678 (1966), which was more in line with the instant case, the court held that a trustee of a bankrupt was not liable for interest accruing after the date of the filing of the petition for adjudication, but was liable for penalties accruing post-petition. However, the court stated, taxes incurred during the arrangement proceedings were expenses of the Chapter XI proceeding and were technically a first priority under Section 64(a)(1) of the Bankruptcy Act. Consequently, this court concluded that the bankrupt's estate was liable for tax penalties incurred after the filing of the Chapter proceedings, but not liable for postpetition interest.