By Eugene Kim
In re Majestic Star Casino, LLC, F.3d 736 (3rd Cir. 2013), the U.S. Court of Appeals for the Third Circuit broke from other courts by holding that S corporation status (or "qualified subchapter S subsidiary" or "QSub" status) is not property of the estate of the S corporation’s bankruptcy estate. Other Circuits have routinely held that entity tax status is property of the estate.
In Majestic, Majestic Star Casino II, Inc. ("MSC II"), along with several of its affiliates (collectively, the "Debtors") was controlled by Barden Development, Inc. ("BDI"), whose sole shareholder was Don H. Barden ("Barden"). The Debtors, not including BDI or Barden, filed for bankruptcy under Chapter 11 in Delaware Bankruptcy Court on November 23, 2009.