Franchise Tax Board of the State of California v. MacFarlane (In re MacFarlane)

SKOPIL, Senior Circuit Judge:

We address in these appeals which party has the ultimate burden of proof in bankruptcy proceedings when a state files a claim for taxes alleging that a debtor’s bad debt deductions are invalid. Both the bankruptcy and district courts held that the state bears the burden of proving its claim. The bankruptcy court determined that the state failed to meet its burden and entered judgment in favor of the debtor; the district court reversed, ruling that inferences drawn from the evidence create triable issues of fact. We affirm the allocation of the burden of proof; we…