Some Bankruptcy Cases

 

      If the IRS claims that you owe back taxes, you should pay special attention to this article.  Bankruptcy may prove to be a very effective way for you to escape the debt.  The rules regarding the bankruptcy of taxes are complex and the case law seems to make them more complex every day. 

 

      In the case of In re Carolinch Co. 210 B.R. 518 (Bkrtcy.E.D.Pa. 1997), the court ruled that a tax lien must be filed or recorded to be valid, and rule of "first in time first in right" applies in determining the validity of a senior creditor versus a junior IRS lien.

 

      In the case of In re Dixon 210 B. R. 610 (Bkrtcy. W.D. Okl. 1977), the court ruled that a Chapter 13 debtor's 1992 income tax liability which was payable before the bankruptcy case was prepetition debt.  Since the IRS failed to file a proof of claim for the prepetition debt, the plan resulted in a discharge in favor of the debtor.

 

      Payments made to the IRS in a confirmed Chapter 13 plan were "vested" with the IRS and could not be returned to the debtor after conversion to a Chapter 7.  In re
Verdunn, 210 B.R. 621 (Bkrtcy M.D. Fla 1997)

 

      The court determined in the case of In re Sommers, 209 B. R. 471 (Bkrtcy N.D. Ill. 1997) that the debtor willfully evaded taxes by transferring his assets to domestic and off-shore entities.

 

      A tax protestor who filed a Chapter 13 failed to overcome the prima facie assumption of correctness of the IRS' claim.  In re Myrland, 209 B.R. 524 (Bkrtcy.W.D.Wash. 1997)

 

      A taxpayer filed an extension for a due date of federal tax returns and the court determined that his taxes were priority status.  See In re Bishop, 209 B.R. 578 (Bkrtcy N.D.Ga. 1997).

 

      The court in In re Weiss, 209 B.R. 571 (S.D.Fla. 1996), determined that the IRS' refusal to accept the debtor's tax returns showing the correct amount of tax was arbitrary.

 

      A Chapter 7 debtor was determined to have willfully attempted to evade taxes when he transferred assets to a live-in companion without consideration.  The court determined that the willful attempt to evade tax may include any effort to mislead or conceal.  See In re Griffith, 210 B.R. 216 (S.D.Fla. 1997).

 

      A Chapter 7 debtor's intentional failure to file tax returns and his failure to pay taxes when he could afford to pay was sufficient to prove that the debtor intended to evade or defeat his tax liabilities for dischargeability purposes.  See In re Fedeley, 118 F.3d 979 (3rd Cir. 1997).

 

      The IRS was found liable for all damages including attorney's fees and bank service charges when it violated the automatic stay.  In re Fedeley, 118 F3d 979 (3rd Cir. 1997).

 

      The state did not have to produce registered mail receipts to prove that taxes were properly assessed.  Matter of Humble, 209 B.R. 54 (Bkrtcy.E.D.La.1977).

 

      The tax lien survives the discharge as to the property owned by the debtor at the time of the bankruptcy.  Matter of McCorkle, 209 B.R. 773 (Bkrtcy.M.D.Ga. 1977).

 

      This issue is very important so pay close attention.  The court determined that a prior bankruptcy tolls the running of tax discharge periods, but the taxing entity is not entitled to an additional six months of tolling time.  See In re Rangel, 209 B.R. 745 (Bkrtcy.D.Kan. 1977).  Citing In re Richards, 994 F.d 763 (10th Cir.1993). Note also that a prior bankruptcy tolls the running of the three-year priority period.  See In re Zecco, 221 B.R. 109 (Bkrtcy.D.Mass 1997). Also see Montoya v. United States (In re Montoya), 965 F.2d 554 (7th Cir. 1992); Waugh v. Internal Revenue Service (In re Waugh); 109 F.3d 489 (8th Cir. 1997).

 

      The issue of the filing of the return is extremely important.  In the case of In re Huber, 211 B.R. 767 (Bkrtcy.M.D.Fla., 1977, a Chapter 7 debtor could not discharge his tax because he failed to show by a preponderance of the evidence that the tax return was filed; the only evidence acceptable in the Eleventh Circuit is either a postmark on the envelope or a registered or certified mail receipt; the debtor's testimony and a production of a copy of the return were insufficient.  In re Huber, 211 B.R. 767 (Bkrtcy.M.D.Fla. 1997).

 

      The taxpayer bears the ultimate burden of proof with regard to the validity of a tax claim asserted in the context of a bankruptcy proceeding.  See Thinking Machines Corp. v. New Mexico Taxation and Revenue, 211 B.R. 426 D.Mass. 1977).