United States v. Randall

The debtor corporation, kept in possession of its business by court order under Chapter XI of the Bankruptcy Act, did not comply with requirements that it deposit withheld taxes in a special tax account. It was later adjudicated a bankrupt, and the United States asked the bankruptcy court to pay the amount of withheld taxes prior to payment of costs and expenses of the bankruptcy proceedings, pursuant to 26 U.S.C. § 7501 (a), which provides that the amount of withheld taxes "shall be held to be a special fund in trust for the United States." The referee denied the request, and the District Court and the Court of Appeals agreed.

Held: Section 64 (a)(1) of the Bankruptcy Act, which is an overriding statement of federal policy on the question of priorities, clearly provides that the first priority in payments from bankrupt estates belongs to the costs and expenses of administration incurred in the bankruptcy proceedings. Pp. 515-517.

419 F. 2d 1068, affirmed.

DOUGLAS, J., delivered the opinion of the Court, in which HARLAN, BRENNAN, WHITE, and MARSHALL, JJ., joined. BLACKMUN, J., filed a dissenting opinion, in which BURGER, C.J., and BLACK and STEWART, JJ., joined, post, p. 518.

Richard B. Stone argued the cause for the United States. With him on the brief were Solicitor General Griswold, Assistant Attorney General Walters, and Crombie J.D. Garrett.

Kevin J. Gillogly argued the cause for respondent. With him on the brief was Daniel C. Ahern.