Opinion
No. 78-616 EG
May 10, 1979
Reclamation — Set Off — Taxes — Inadvertent Refund
The government is entitled to reclaim the proceeds of a check which it inadvertently issued to the bankrupt three days before the filing of the petition in bankrupcy, at a time when the bankrupt actually owed the government money. See Sec. 64a(4) at ¶ 2628 and Sec. 507(a)(6) at ¶ 9032, and Sec. 68a at ¶ 2671 and Sec. 553(c) at ¶ 9558.
[Digest of Opinion]
When the bankrupt filed its voluntary petition in bankruptcy, it owed the Internal Revenue Service $95,152.00. Despite that fact, and unaware that the petition in bankruptcy had been filed, the I. R. S. inadvertently issued a check for $97,236.22, representing the prior year's refund, which check the bankrupt turned over to the trustee.The trustee argued that the I. R. S. should be considered to have waived its right to set off and should not be granted reclamation, despite the fact that the refund was made by error. The court ruled, however, that the I. R. S. had a right of set off under Section 68a of the Bankruptcy Act, which it inadvertently overlooked. Citing the case of Chassen v. United States, CCH BANKRUPTCY LAW REPORTS ¶ 9558.0133, the court found that as the government inadvertently made a refund despite the fact that taxes were owing by the bankrupt to the government, reclamation should be allowed.