The United States of America (“Government”) appeals from the district court’s order affirming the judgment of the bankruptcy court. The district court ruled that the Government’s claim for 1988 income taxes, filed as an administrative claim in Pacific Atlantic Trading Company’s (“PATCO”) Chapter 7 bankruptcy, was not an allowable administrative expense because: (1) the taxes were taxes of a kind specified in 11 U.S.C. § 507(a)(7)(A)(iii) (1988)
The Government contends that its claim for PATCO’s 1988 income taxes is entitled to first priority as an administrative expense rather than seventh priority as an unsecured tax claim because the taxes were incurred by the estate and were not taxes of a kind specified in § 507(a)(7). The Government also asserts that the district court erred in refusing the 1988 tax liability first distribution with other priority claims pursuant to § 726(a)(1), despite the Government’s failure to file a timely proof of claim. We affirm the portion of the district court’s judgment concluding that the Government’s claim for PATCO’s pre-petition 1988 income taxes does not qualify as an administrative expense. We reverse the district court’s ruling that PATCO’s tax liability for 1988 be distributed with late-filed, non-priority claims.
BACKGROUND
The facts and procedural history in this case are not in dispute. PATCO was in the business of importing and exporting foodstuffs and other goods between the United States and the Far East. From 1985 to 1988, PATCO’s president and chief executive officer, Peter Chui Lin Wong, and his wife, Dorothy Chao, fraudulently obtained lines of credit by submitting false bills of lading to various banks for collection of “phantom” shipments of goods to customers in Hong Kong, and by submitting other bills of lading to more than one bank for collection. During 1988, PATCO defaulted on these numerous lines of credit. The funds were not repaid, and Wong and Chao pled guilty to charges of bank fraud in 1990.
A. Initiation of the Bankruptcy
On September 15,1988, PATCO’s creditors filed an involuntary petition against PATCO pursuant to the provisions of Chapter 7 of the Bankruptcy Code. On October 31, 1988,
On or about June 21, 1989, the bankruptcy court clerk served an order on all creditors of the debtor, including the Internal Revenue Service (“IRS”), setting the last day to file a proof of claim with the bankruptcy court (the “bar date”) for October 12, 1989. The IRS branch concerned with bankruptcy filings opened a file regarding the case. As of the bar date, IRS records showed that the debt- or had no outstanding assessments or unas-sessed tax liabilities. The records showed, however, that PATCO had not filed income tax returns for the years 1985, 1986, 1987, and 1988, and that PATCO had made no installment payments of estimated taxes for these years. The records also reflected that PATCO had filed requests to extend the time in which to file its returns for 1985 and 1987. In the extension requests, PATCO reported that it had no federal tax liability.
On February 8, 1991, over one year after the bar date, the Government filed a nonadministrative priority claim in PATCO’s bankruptcy case under § 507(a)(7) of the Bankruptcy Code in the amount of $58,622,-109.10. This claim sought pre-petition
On May 1, 1991, the Trustee filed PAT-CO’s 1988 federal corporate income tax return and requested a prompt determination of the debtor’s liability for the 1988 tax year under 11 U.S.C. § 505.
On September 3, 1991, the Trustee filed a motion for summary judgment seeking disal-lowance of the Government’s claim for the taxable years 1985, 1986, 1987, and 1988 for failure to file a timely proof of claim. On October 21, 1991, while the Trustee’s motion for summary judgment was pending, the Government filed an administrative expense claim reclassifying its claim for the PATCO’s 1988 taxes as an administrative expense pursuant to 11 U.S.C. § 503(b)(l)(B)(i).
B. The Related Litigation: Taxable Years 1985, 1986, and 1987
On January 31, 1992, the bankruptcy court disallowed the portion of the claim that was based upon the taxable years 1985,1986, and 1987 for failure to file a timely proof of claim. The order clarified its scope as follows: “The administrative claim, including that portion of the Internal Revenue Service’s administrative claim for the year 1988 which was formerly part of its general unsecured claim, is not affected by this Order.” On appeal, the district court affirmed in part and remanded in part. The district court held that because the Government’s claim was untimely the
The Government filed an appeal from the district court’s January 31, 1992 order. We reversed the judgment on August 18,1994, in a published opinion. In United States v. Towers (In re Pac. Atl. Trading Co.),
C. The Instant Appeal: Taxable Year 1988
On October 22, 1991, the Government reclassified its claim for PATCO’s 1988 taxes as an administrative expense in the amount of $6,186,260.00, plus interest and penalties in the amount of $3,220,711.27, for a total claim of $8,406,971.27. On January 7, 1992, the Trustee filed a complaint for declaratory relief seeking a determination that the Government was not entitled to the administrative expense claim.
The Trustee and the Government filed cross-motions for summary judgment in the adversary proceeding. The Trustee argued that because the debtor had not engaged in business activity after the entry of the order for relief appointing him as Trustee, all of the debtor’s 1988 income was pre-petition income, and did not qualify as an administrative expense.
At a hearing on April 16, 1992, the bankruptcy court indicated that it agreed with the Trustee’s legal position but found that a factual issue remained as to whether any income was earned subsequent to the Trustee’s appointment on November 2, 1988. The bankruptcy court offered the Government a period of 120 days to submit affidavits to controvert the Trustee’s assertion that all of PATCO’s 1988 income was earned prior to the appointment of the Trustee on November 2, 1988. The Government failed to submit affidavits controverting the Trustee’s assertion.
On October 20, 1992, the bankruptcy court entered an order granting the Trustee’s motion for summary judgment in full. The Bankruptcy Court held that only post-petition expenses qualify as administrative expense claims. It found that, because the income at issue in the 1988 claim was earned prior to the appointment of the Trustee, it was not incurred by the estate, and did not qualify as an administrative claim under 11 U.S.C. § 503.
The district court affirmed. See Towers v. United States (In re Pac.-Atl. Trading Co.),
Alternatively, the district court found that even if the tax at issue was not of the type specified in § 507(a)(7)(A)(iii), it did not satisfy the “incurred by the estate” requirement in § 503(b)(l)(B)(i). Id. at 139. The court stated that there was a split of authority as to when taxes are incurred, but rejected the Government’s position that the tax at issue was not incurred 'until the end of the taxable year. Id. The court ruled instead that all taxable activity in this case occurred prior to the date the Trustee was appointed. “[A]d-ministrative expenses were intended to cover only the ‘actual, necessary costs and expenses of preserving the estate’ ” and allowing the tax at issue as an administrative expense would “subvert the intended purpose” of the statute. Id.
Finally, the district court concluded that, in accordance with its earlier judgment regarding the 1985, 1986, and 1987 taxes, the Government’s claim for the 1988 tax was denied first-tier distribution under § 726(a)(1) as untimely filed, and would be classified under § 726(a)(3). Id. The district court reasoned: “The claims decided by this Court initially included the 1988 tax debt which the IRS then withdrew to file separately as an administrative expense. Because the relevant facts [the Government’s failure to file a timely proof of claim] pertain equally to the 1988 tax claim, the Court’s previous decision governs as well.” Id.
This appeal followed.
ANALYSIS
A district court’s interpretation of the Bankruptcy Code is a matter of statutory construction subject to de novo review. Acequia, Inc. v. Clinton (In re Acequia),
I. Is the 1988 Tax Assessment an Administrative Expense?
The first issue in this case is whether the IRS’s claim for PATCO’s 1988 taxes is an administrative expense. In distributing the assets of the estate, administrative expenses have first priority. 11 U.S.C. § 507(a)(1). In general, tax claims that do not qualify as administrative expenses are accorded seventh priority. 11 U.S.C. § 507(a)(7). Section 503 defines administrative expenses. In particular,
A. “Incurred by the Estate”
The Government contends that the district court erred in concluding that the 1988 taxes were not “incurred by the estate.” The Government argues that the definition of “incurred” in the legislative history of the Bankruptcy Code indicates that an income tax is incurred on the last day of the taxable period, rather than as it accrues. The Government also contends that the case law relied upon by the district court is not binding and does not justify a departure from congressional intent stated in the relevant legislative history. The Trustee counters that the administrative claim was based entirely upon PATCO’s pre-petition activity, and therefore the liability was not “incurred by the estate” as required by language of § 503(b)(1)(B)®.
In determining the scope of a statute, a court must look first to its language. Reves v. Ernst & Young, — U.S.-,-,
It is undisputed that an “estate” is not created until the debtor files for bankruptcy. 11 U.S.C. § 541(a). The term “incurred,” however, is not defined in the Bankruptcy Code. In addition, the dictionary definition provides little guidance. According to its common usage, “incur” means to “become liable or subject to.” Webster’s Third New International Dictionary 1146 (4th ed. 1976). In this ease, the income subject to taxes accrued pre-petition, when there was no bankruptcy estate, but became payable after the estate was created. Utilizing the dictio-nary definition, it is unclear whether the debtor “bec[a]me liable or subject to” the corporation’s 1988 income taxes as they accrued, or whether the estate “bec[a]me liable or subject to” the 1988 income taxes when they were due. Accordingly, the phrase “incurred by the estate” is facially ambiguous.
This court has not yet resolved the question whether income taxes which straddle the petition date are “incurred by the estate.” In Official Creditors Comm. v. Tuchinsky (In re Major Dynamics, Inc.),
The Trustee’s citation to two pre-Bank-ruptcy Code cases are inapposite for the same reason. In McGugin v. District Director (In re Dolard),
If the statutory language is unclear, we look to legislative history to glean Congress’ intent. Blum v. Stenson,
In the process of drafting the 1978 version of the Bankruptcy Code, Congress addressed the interaction between the bankruptcy laws and the tax laws. “The initial discussions were begun in the House of Representatives, followed by debates in the Senate and ultimately concluded with the introduction of a compromise bill.” Hy-Test, Inc. v. Missouri Dep’t of Revenue (In re Interco, Inc.),
In 1973, the Commission on the Bankruptcy Laws of the United States, a commission created by Congress to study and recommend changes in the bankruptcy laws, prepared a report that included recommendations regarding the tax aspects of bankruptcy. See Report of the Commission on the Bankruptcy Laws of the United States [July 197S] (Part I), H.R. Doe. No. 137, 93d Cong., 1st Sess. 279, reprinted in Collier on Bankruptcy, Appendix Volume 2 at 1 (15th ed. 1995). The commission proposed that in a liquidation case, the corporation’s tax year should be terminated at the date of the petition and the estate of the corporation should be treated as a separate taxable entity. Report of the Commission on the Bankruptcy Laws of the United States [July 1973] (Part II), H.R. Doc. No. 137, 93d Cong., 1st Sess. 279, reprinted in Collier on Bankruptcy, Appendix Volume 2 at 186 (15th ed. 1995).
The House rejected the Commission’s proposal to treat the estate of a corporate debt- or as a separate taxable entity. H.R.Rep. No. 595, 95th Cong., 1st Sess. 276 (1977) reprinted in 1978 U.S.C.C.A.N. 5787, 6233. Instead, the House Report accompanying title 11 of the House of Representatives’ proposed bankruptcy bill stated: “With respect to a corporate debtor, section 346(c)(1) ... follows current law. The estate is not a separate taxable entity, and the corporation remains taxable as if the case had not been commenced.” Id.
The Senate Judiciary Committee agreed with the House Report that the estate of a “corporated [sic] debtor is not a separate entity for tax purposes. The income of the debtor is to be taxed as if the case were not commenced!.]” S.Rep. No. 989, 95th Cong., 2d Sess. 45 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5831. After the Senate Judiciary Committee reported its version of the bill, it was referred to the Senate Finance Committee “for its consideration of the tax-related provisions in the bill.” Collier on Bankruptcy, Appendix Volume 3 at VI-1 (15th ed. 1995). The Senate Finance Committee recommended amendments to several sections of the Senate’s bill, all of which were adopted by the Senate on September 7,1978. Id.
One of the amendments recommended by the Finance Committee was a “general definition of when a tax is ‘incurred’ for purposes of the various tax collection rules affecting the debtor and the estate.” S.Rep. No. 1106, 95th Cong., 2d Sess. 7-8 (1978), reprinted in Collier on Bankruptcy, Appendix Volume 3 at VI (15th ed. 1995). As amended, § 346(a)(1) of the proposed legislation provided that:
(a) For purposes of this title—
(1) a tax on or measured by income or gross receipts for a taxable period shall*1300 be considered incurred on the last day of the taxable period;
(2) a tax on or measured by payment of wages or compensation, production or use of property, transfers by death, gift, sale or otherwise (other than a tax on income from any such transfer), or other transactions or events shall be considered incurred on the last day of such transaction or event.
S. 2266, 95th Cong., 2d Sess., § 346(a) (1978) (as reported by the Senate Judiciary Committee and the Senate Finance Committee), reprinted in Collier on Bankruptcy, Appendix Volume 3 at VII (15th ed. 1995) (emphasis added). “After the Senate adopted its amendment ... and sent the bill back to the House, the floor managers in both Houses met and agreed upon a compromise bill.” Collier on Bankruptcy, Appendix Volume 3 at IX-1 (15th ed. 1995). The Senate Finance Committee’s definition of when a tax is incurred was not included in the compromise bill. Interco,
The House Amendment also adopts the substance of the definition in section 346(a) [of] the Senate amendment of when taxes are to be considered “incurred” except that the House amendment applies these definitions solely for purposes of determining which category of section 507 tests the priority of a particular tax liability. Thus, for example, the House amendment contains a special rule for the treatment of taxes under the 45-day exception to the preference rules under section 547 and the definitions of when a tax is incurred for priority purposes are not to apply to such preference rules. Under the House amendment, for purposes of the priority rules, a tax on income for a particular period is to be considered “incurred” on the last day of the period. A tax on or measured by some event, such as the payment of wages or a transfer by reason of death or gift, or an excise tax on a sale or other transaction is to be considered “incurred” on the date of the transaction or event.
124 Cong.Rec. 32,416 (September 28, 1978) (statement of Rep. Edwards); 124 Cong. Rec. 34,016 (October 5, 1978) (statement of Sen. DeConcini) (emphasis added).
These statements indicate that Congress omitted the Senate Finance Committee’s broad definition because of concern over the impact of the definition of the term “incurred” upon the rule for preferences. We are persuaded that it is equally apparent from these statements that, in the absence of an explicit definition, Congress intended for a tax on income to be considered “incurred” on the last day of the income period.
In addition to relying on the legislative history of the Bankruptcy Code, the Government also refers to various provisions of the Internal Revenue Code to reinforce its position that PATCO’s 1988 income taxes were not incurred prior to the close of the reporting period. The Government asserts that by excluding pre-petition income from eligibility as an administrative expense, the court “effectively allow[s] the closing of the taxable year of the debtor upon commencement of the bankruptcy case and treat[s] the debtor corporation as if it were a separate taxable entity.” The Government explains that, pursuant to § 1398(d)(2) of the Internal Revenue Code, an individual debtor generally is provided with the election to close his or her taxable year on the day before the bankruptcy case commences without the prior consent of the Internal Revenue Service. 26 U.S.C. § 1398(d)(2) (1988). Corporations, by contrast, are specifically precluded from creating two separate taxable entities by declaring a short tax year. 26 U.S.C. § 1399 (1988). The Government thus reasons that by allowing the Trustee to avoid the 1988 taxes as an administrative expense of the estate, the court is permitting PATCO to close its tax
The Trustee argues that we cannot consider the definition included in the Senate Finance Committee’s draft of § 346 because it never became law. The Trustee also contends that the statements of Representative Edwards and Senator DeConcini are themselves ambiguous, and that the proposed definition was intended to apply at best only to § 507, not to § 503. We disagree.
We must look to the legislators’ explanation of what the term “incurred” was intended to mean precisely because the legislative intent is not clear on the face of § 503(b)(l)(B)(i), and because a definition is not provided elsewhere in the Code. Representative Edwards and Senator DeConcini provided a clear explanation of the intent of the statutory language, as well as a cogent explanation for the omission of a definition of the words “incurred by the estate” in the final version of the Code. We also reject the Trustee’s implication that the legislators’ comments refer only to § 507. Section 507(a)(1) cross-references § 503(b). As such, the legislators’ reference to § 507 encompasses a reference to § 503. This must be the case because the word “incurred” appears in § 503 of the Bankruptcy Code and not in § 507.
The pertinent legislative history clearly demonstrates that the drafters of § 503(b)(l)(B)(i) intended that a tax on income should be treated as “incurred” on the last day of the taxable period. But cf. In re O.P.M. Leasing Servs., Inc.,
B. Section 507(a)(7) Exception
The fact that PATCO’s 1988 corporate tax liability was “incurred by the estate” does not mean that it is an administrative expense, however, if it falls within the exception set forth in 11 U.S.C. § 507(a)(7). See 11 U.S.C. § 503(b)(1)(B)©. Section 507(a)(7) provides, in pertinent part:
(a) The following expenses and claims have priority in the following order:
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(7) Seventh, allowed unsecured claims of governmental units, only to the extent that such claims are for—
(A) a tax on or measured by income or gross receipts—
(i) for a taxable year ending on or before the date of the filing of the petition for which a return, if required, is last due, including extensions, after three years before the date of the filing of the petition;
(ii) assessed within 240 days, plus any time plus 30 days during which an offer in compromise with respect to such tax that was made within 240 days after such assessment was pending, before the date of the filing of the petition; or
(in) other than a tax of a kind specified in section 523(a)(1)(B) or 523(a)(1)(C) of this title, not assessed before, but assessable, under applicable law or by agreement, after, the commencement of the ease[.]
11 U.S.C. § 507.
It is undisputed that PATCO’s 1988 income taxes do not satisfy § 507(a)(7)(A)© because the taxable year did not end “on or before the date of the filing of the petition.” PATCO’s 1988 taxable year ended December 31, 1988; the petition was filed September 15, 1988. Similarly, § 507(a)(7)(A)(ii) is not satisfied because the 1988 tax liability was
A court should begin its analysis by applying the words of § 507(a)(7)(A)(iii) literally. United States v. Ron Pair Enters., Inc.,
The Government contends that the taxes at issue fail to satisfy § 507(a)(7)(A)(iii). Specifically, the Government claims that a literal application of the words of § 507(a)(7)(A)(iii) is improper because such an application: (1) interprets the subsection out of its proper context; (2) renders a portion of the statute superfluous; (3) contradicts legislative intent; and (4) leads to unintended consequences. We reject each of the Government’s claims as mere exercises in semantics.
The Government first argues that the district court erred by failing to interpret § 507(a)(7)(A)(iii) in the context of the two preceding subsections. The Government reasons as follows:
Generally speaking, subsections 507(a)(A)(7)(i) [sic] and (ii) provide a priority for the last three income tax years that are assessable before the petition is filed without regard to when the assessment is actually made and for even more ancient tax years if the assessment is made within 240 days prior to the bankruptcy filing. Subsection 507(a)(7)(A)(iii) supplements these provisions [507(a)(7)(A)(i) and 507(a)(7)(A)(ii) ] by allowing priority treatment for such older tax years when the taxes for those years have not been assessed, but remain “assessable, under applicable law or by agreement after, the commencement of the case.” See 1A Collier on Bankruptcy ¶ 11.01 [should be 11.02][d][i]-[iii] (15th ed. 1993). Reading subsection (iii) as a complement to subsections (i) and (ii), the statutory reference to taxes that have not been “assessed before” the petition must refer to taxes that “were assessable, but not assessed, before” the petition. The District Court’s reading of § 507(a)(7)(A)(iii) as encompassing taxes that could not have been assessed before, but are assessable after, the petition was filed—such as the debtor’s 1988 income tax—is noncontextual and incorrect.
This argument is without merit. There is no indication in the text of the statute itself that subsection (iii) functions as a supplement to subsections (i) and (ii). Rather, subsections (i), and (ii) and (iii) are provided as alternatives, separated by the word “or”. In construing a statute, a court should interpret subsections written in the disjunctive as setting out separate and distinct alternatives. United States v. Behnezhad,
Moreover, the Government fails to point to any valid authority supporting its interpretation that § 507(a)(7)(A)(iii) claims are limited to claims that arose pre-petition and were assessable pre-petition. The passage from Collier on Bankruptcy cited by the Government does not contain any lan
The Government next claims that a literal application of the terms of the statute renders the phrase “not assessed before” superfluous. The Government explains that, under the plain meaning adopted by the district court, the phrase “not assessed before” is a redundant form of “but assessable after,” because once a tax is “assessed” it is no longer “assessable.”
A statute should be read to give meaning to all of its parts. Boise Cascade Corp. v. EPA,
The Government’s third argument is that the statute is ambiguous. Accordingly, the Government urges this court to consider legislative history which allegedly demonstrates that Congress did not intend for § 507(a)(7)(A)(iii) to apply to post-petition liabilities which were not eligible to be assessed before the petition date. This is an unavailing argument for two reasons. First, the Government conceded to the district court that “on its face, [PATCO’s] tax liability would satisfy the requirement of Bankruptcy Code Section 507(a)(7)(A)(iii).” Second, the phrase “not assessed before, but assessable, under applicable law or by agreement, after, the commencement of the ease” has a clear meaning. The dictionary defines “assess” as “to determine the rate and amount of [as a tax, charge, or fine].” Webster’s Third New International Dictionary 131 (4th ed. 1976). Section 507(a)(7)(A)(iii) thus plainly includes income taxes which, like those at issue in this ease, the Government did not assess before November 2, 1988, but were assessable after the commencement of the case.
Finally, the Government claims the plain language interpretation mandates that every corporate income tax is ineligible as an administrative expense. More specifically, the Government contends that by applying the plain language of the statute, a corporate income tax that begins and ends post-petition, such as the debtor’s 1989 income taxes, could be categorized as a seventh-level priority rather than as an administrative expense because the tax “was not assessed before but was assessable” after the commencement of the case. We will not presume Congress intended an absurd result. See Bechtel Constr., Inc. v. United Bhd. of Carpenters,
Two other courts have considered whether a corporate income tax claim for an entire tax year is of the kind specified by § 507(a)(7)(A)(iii) when the debtor corporation files for bankruptcy in the middle of its fiscal year but tax liability is not determined until the close of the fiscal year. In Interco,
Similarly, in In re O.P.M. Leasing Servs., Inc.,
We conclude that PATCO’s income taxes fit squarely within the unambiguous terms of § 507(a)(7)(A)(iii). Because the 1988 income tax claim is a tax of a kind specified in § 507(a)(7), it is not entitled to administrative priority pursuant to § 503 of the Bankruptcy Code.
In conclusion, we hold that PATCO’s 1988 income tax liability for income earned prior to the granting of the order for relief and the appointment of the Trustee on October 31, 1988 does not qualify as an administrative expense. Even though the taxes were “incurred by the estate” on December 31, 1988, the plain meaning of the phrase “not assessed before, but assessable, under applicable law or by agreement, after, the commencement of the case,” persuades us that the 1988 tax claim fits squarely within the definition of § 507(a)(7)(A)(iii) and is therefore not an allowable administrative expense.
II. Should the 1988 Income Tax be Distributed Pursuant to § 726(a)(1) ?
The Government argues that, if PATCO’s 1988 income tax liability is not an administrative expense within the meaning of § 503 of the Bankruptcy Code, it nevertheless should be allowed as a priority tax claim entitled to first distribution under 11 U.S.C. § 726(a)(1). The district court found that, because the Government failed to file a timely proof of claim, PATCO’s 1988 tax liability was not entitled to first distribution under 11 U.S.C. § 726(a)(1), but rather should be distributed third with late-filed, non-priority claims under 11 U.S.C. § 726(a)(3).
Our decision in United States v. Towers (In re Pac. Atl. Trading Co.),
AFFIRMED IN PART AND REVERSED IN PART.
Notes
. Unless otherwise indicated, all references to the United States Code are to the Bankruptcy Code, Title 11, 1988 edition.
. In the case of an involuntary bankruptcy petition, the operative date for determining whether a claim arises pre-petition or post-petition is the earlier of the date of the entry of the appointment of a trustee or the date of the entry of the order for relief. 11 U.S.C. § 502(f). In this case, the order for relief and appointment of trustee was entered on November 2, 1988.
. 11 U.S.C. § 505 provides, in pertinent part, that:
A trustee may request a determination of any unpaid liability of the estate for any tax incurred during the administration of the case by submitting a tax return for such tax and a request for such a determination to the governmental unit charged with responsibility for collection or determination of such tax.
11 U.S.C. § 505(b).
. The Government's previous proof of claim classifying the 1988 tax liability as a pre-petition claim was subsequently withdrawn, subject to reinstatement.
. 11 U.S.C. § 726 provides, in pertinent part, that:
(a) Except as provided in section 510 of this title, property of the estate shall be distributed—
(1) first, in payment of claims of the kind specified in, and in the order specified in, section 507 of this title;
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(3) third, in payment of any allowed unsecured claim proof of which is tardily filed under section 501(a) of this title, other than a claim of the kind specified in paragraph
(2)(C) of this subsection[.]
11 U.S.C. § 726(a).
. During December 1988, PATCO's bankruptcy estate received income in the amount of $6,656.25. Both parties agree that this income was reported by the Trustee in PATCO's 1988 income tax return and, after taking deductions into account, no tax was due on this income. Accordingly, the only income at issue in this appeal is income earned prior to the entry of the order for relief and the appointment of trustee on November 2, 1988.
. 11 U.S.C. § 503 provides, in pertinent part, that:
(b) After notice and a hearing, there shall be allowed administrative expenses, other than claims allowed under section 502(f) of this title, including—
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(1)(B) any tax—
(i) incurred by the estate, except a tax of a kind specified in section 507(a)(7) of this title[J
. 11 U.S.C. § 507 provides, in pertinent part, that:
(a) The following expenses and claims have priority in the following order:
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(7) Seventh, allowed unsecured claims of governmental units, only to the extent that such claims are for—
(A) a tax on or measured by income or gross receipts—
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(iii) other than a tax of a kind specified in section 523(a)(1)(B) or 523(a)(1)(C) of this title, not assessed before, but assessable, under applicable law or by agreement, after, the commencement of the case[.]
11 U.S.C. § 507(a)(7)(A)(iii).
. The electronic database incorrectly indicates that the district court’s opinion has been reversed by United States v. Towers (In re Pac. Atl. Trading Co.),
. "Because of the absence of a conference and the key roles played by Representative Edwards and his counterpart floor manager Senator De-Concini, we have treated their floor statements on the Bankruptcy Reform Act of 1978 as persuasive evidence of congressional intent.” Begier v. Internal Revenue Serv.,