In Uncategorized on 11/29/2012 at 17:02

Even If It Isn’t

That’s Judge Ruwe’s lesson to IRS in a 7463 “not for nuthin’”, Terrance Dale Moore, Jr., and Rhonda R. Moore, 2012 T. C. Sum. Op. 116, filed 11/29/12.

TD and Rhonda got hit for $26K in tax, interest and penalty; they paid about $6K to IRS, who wanted the balance, but TD and Rhonda filed Chapter 13. IRS filed a proof of claim for $16K (by mistake, IRS trial counsel admits), TD and Rhonda get a Chapter 13 payment plan confirmed, and TD and Rhonda pay IRS’ claim in full.

After IRS got paid in full what they (erroneously) claimed they were owed, TD and Rhonda converted the 13 to a 7, and get discharged. IRS demands the balance, around $5K plus interest. TD and Rhonda claim they paid what IRS demanded in the Chapter 13, IRS gives them a levy letter and Appeals gives them a NOD, and so off to Tax Court.

Judge Ruwe: “A confirmed chapter 13 plan determines the amount each creditor will be paid. Parties who fail to object to the confirmation of a plan are generally barred from later attacking the confirmed plan. It is a well-established principle of bankruptcy law that a party with adequate notice of a bankruptcy proceeding cannot ordinarily attack a confirmed plan. Respondent did not object to the bankruptcy court’s confirmation of petitioners’ chapter 13 plan. Indeed, respondent received the full amount of the claim he made in petitioners’ chapter 13 bankruptcy case.” 2012 T. C. Sum. Op. 116, at p. 8. (Citations, internal parentheses and quotation marks omitted.)

Moreover, “In the bankruptcy proceeding petitioners listed the correct amount of their tax liability. There was no subterfuge by petitioners. Respondent then filed a proof of claim for a lesser amount. The mistake was solely the responsibility of respondent. In the final analysis respondent got everything he asked for in the bankruptcy proceeding and suffered no disadvantage in that proceeding when it was subsequently converted.” 2012 T. C. Sum. Op. 116, at p. 9.

IRS tried to argue that when the Chapter 13 was converted to Chapter 7, all bets were off and it was open season on TD’s and Rhonda’s liability. No, says Judge Ruwe, while that’s the rule as to creditors who weren’t paid in full what they claimed pre-conversion, IRS got what they asked for pre-conversion.

Based on the unique facts here, TD and Rhonda are off the hook. And as for the post-discharge interest on non-dischargeable debts, IRS didn’t state what the amount of interest was or how it was calculated, so clearly it was an abuse of discretion by Appeals to confirm a levy without having firm numbers.

TD and Rhonda win.

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