Bankruptcy-Tax

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7^th Circuit Court of Appeals

Case Name: Gordon Green v. David Leibowitz

Case No.: 23-2841

Officials: St. Eve, Kirsch, and Kolar, Circuit Judges

Focus: Bankruptcy-Tax

Gordon Green filed for Chapter 7 bankruptcy on May 11, 2021, listing his “Sun Life: Life Income Fund,” a Canadian Registered Retirement Savings Plan, as an asset. Green sought to exempt this fund under Illinois statute 735 ILCS 5/12-1006, which allows exemptions for assets intended to qualify as retirement plans under applicable provisions of the Internal Revenue Code (IRC). However, the bankruptcy trustee objected, arguing that since the fund was established under Canadian law, it did not meet the exemption criteria. The bankruptcy court agreed, ruling that for an asset to qualify for the exemption, it must be organized under IRC § 401(a), which mandates that the trust be created or organized within the United States.

Green appealed to the Northern District of Illinois. While the district court rejected the bankruptcy court’s requirement that the plan be organized in the U.S., it still found that the Sun Life Fund did not qualify as a tax-qualified retirement plan under the IRC. Therefore, the district court upheld the denial of the exemption.

The Seventh Circuit reviewed the case de novo and assessed whether the Sun Life Fund met the criteria for a retirement plan under the IRC. It observed that the IRC does not explicitly define “retirement plan” for this purpose and noted that Illinois law requires the plan to qualify under relevant IRC provisions. The court concluded that the Sun Life Fund did not satisfy the criteria for a tax-qualified retirement plan under the IRC, as it was not governed by any specific IRC provision that regulates retirement plans. Thus, the Seventh Circuit affirmed the district court’s decision, holding that the Sun Life Fund was not exempt under Illinois statute 735 ILCS 5/12-1006.

Affirmed.

Decided 07/16/24

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