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debtor's estate.
In Begier v. Internal Revenue Service, 496 U.S. 53 (1990), the Court rejected the Trustee's argument that income and social security payments required by law to be collected, withheld from employees' wages and paid to the IRS were preferential. The Court characterized the property as held in a constructive trust before it was paid and not as property that would have been includable in the debtor's estate had the bankruptcy been filed prior to payment to the IRS. The trust for unpaid employee-withholding taxes is imposed in favor of IRS at the moment that the employer-taxpayer pays the employee, whether or not the employer segregates the funds; however, the IRS' prepetition levy on the Chapter 7 debtor-taxpayer's bank account constituted an avoidable transfer of an interest of the debtor in property, rather than payment of trust-fund taxes, where, no reasonable nexus existed between withheld funds and fund in the account.
A trust existed but there was insufficient proof that the Debtor intended to use the funds in question to make a voluntary payment and therefore they were not deemed to be part of the "Trust Fund." United States v. Borock (In re Ruggeri Elec. Contracting, Inc.), 214 B.R. 481 (E.D. Mich. 1997). Where debtor's financial worksheets demonstrate that voluntary payments were intended to pay "trust fund" taxes, the payments are not avoidable because they are deemed to be from assets as not property of the estate. United States v. Pullman Constr. Indus., Inc., 210 B.R. 302 (N.D. Ill. 1997).
In McCafferty v. McCafferty (In re McCafferty), 96 F.3d 192 (6th Cir. 1996), the Court distinguished its prior opinion and found that a pre-bankruptcy divorce decree had created a constructive trust that prevented avoidance by the trustee of transfers under that decree.
Where the debtor held only legal title to property and not an equitable interest, the debtor's interest would have been property of the estate only to the extent of debtor's legal interest. Because the debtor did not own
