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In re McGough, 737 F.3d 1268 (December 16, 2013) 

Dec 16, 2013

The Tenth Circuit addressed the operation of a “safe harbor” provision exempting from the trustee’s power of avoidance, certain transfers to religious organizations. Under § 548 of the bankruptcy code, the trustee may avoid transfers of property in the two years preceding a bankruptcy filing where the debtor “received less than a reasonably equivalent value in exchange” or where the debtor was insolvent or made insolvent by the transfer. An exemption exists for donations to religious or charitable organizations, so long as the contribution does not exceed 15% of the debtor’s gross adjusted income (GAI). The narrow issue before the court was whether the trustee could “recover the entire amount of a charitable contribution if it exceed[ed] 15% of GAI or only the amount in excess of 15%.” Id. at 1272. The court determined “the only reasonable reading of the statute is that the amount of the transfer to be avoided is the entire amount. Nothing in the plain language of the statute indicates that, if the transfer exceeds 15% of GAI, only the portion exceeding 15% is avoidable.” Id. at 1274.