Scheffel v. New York State Department of Taxation & Finance (In Re Lehal Realty Associates)

HOWARD SCHWARTZBERG, Bankruptcy Judge.

The Chapter 11 trustee of the debtor, Lehal Realty Associates, has commenced an adversary proceeding against the New York State Department of Taxation and Finance (“the State”) on the theory that the debtor’s transfer and sale of its real property is exempt under 11 U.S.C. § 1146(c) from a ten percent tax imposed by Article 31-B, § 1441 et seq. of the New York tax law (“Gains Tax”). The State has denied that the transfer in question is exempt from the Gains Tax and has asserted the Eleventh Amendment doctrine of sovereign immunity as well as the defense…