United States ex rel. Internal Revenue Service v. Dumler (In re Cassidy)

SETH, Circuit Judge.

This is an appeal from a judgment by the district court denying priority in bankruptcy to an exaction under Internal Revenue Code Section 72(t). The district court, affirming the bankruptcy court, concluded that the assessment was a “penalty for a nonpecuniary loss,” and thus not entitled to priority under Section 507(a)(7) of the Bankruptcy Code.

Appellants Cassidy and the United States raise two issues on appeal; whether the IRS’s assessment of a 10 percent exaction on the premature withdrawal of pension plan funds pursuant to 26 U.S.C. § 72(t) is a “tax” or a “penalty”;…