IN RE HOME NEWS PRINTING CO., INC. (S.D.Fla. 1978)

BRITTON, Bankruptcy Judge

Section 64 priorities will be recognized in the event that a surplus remains after creditors who have filed their timely proofs of claims have been paid in full and a second distribution is made pursuant to Rule 302(e)(5) of the Rules of Bankruptcy Procedure and Section 57n of the Bankruptcy Act. Sec. 57n at ¶ 2523, Sec. 64a at ¶ 2624 and Sec. 507(a) at ¶ 9026, and Rule 302(e)(5) at ¶ 20,102.

Tax liens against all of the debtor's property are entitled to a fourth priority under Section 64a(4) in a second distribution, even if the only asset in the bankrupt estate is a money recovery made by the trustee on a disputed cause of action successfully prosecuted by the trustee after bankruptcy. The proviso of Section 64a(4) is applicable only to taxes assessed by statute against a particular item of property. See Sec. 64a(4) at ¶ 2628 and Sec. 507(a)(6) at ¶ 9032.

The time for filing claims in this matter had been extended pursuant to Rule 302(e)(5) of the Rules of Bankruptcy Procedure because all creditors who filed within the original deadline had been paid in full and a surplus remained. The Internal Revenue Service claimed a fourth priority status under Section 64a(4) upon five different tax liens.

Priorities are recognized in a second distribution under Bankruptcy Rule 302(e)(5). An extension of time for filing claims under Section 57n of the Bankruptcy Act, and Rule 302(e)(5) does not modify the pattern of distribution prescribed under the Act.

Further, the government is entitled to the fourth priority for taxes under Section 64a(4) of the Act. The trustee had argued that the priority was eliminated by the proviso in Section 64a(4) stating that "no order shall be made for the payment of a tax assessed against any property of the bankrupt in excess of the value of the interest of the bankrupt estate therein as determined by the court." In this case the only asset in the bankrupt estate was the money recovery made by the trustee on a disputed cause of action successfully prosecuted by the trustee after bankruptcy. On the date of bankruptcy, this asset existed only as an unliquidated claim of speculative value, Nevertheless, the proviso is applicable "only to taxes `assessed' against property of the bankrupt." As the government's liens were against all of the debtor's property and were not an ad valorem tax assessed by statute against or upon a particular item of real or personal property, the proviso was not applicable and the claim was allowed as a fourth priority claim.