Attorney-at-Law

SEVEN DAYS IN APRIL

In Uncategorized on 11/27/2017 at 17:07

No, not a variant on the Knebel-Bailey novel or the 1964 Frankenthaler thriller. This is the story of Benjamin Jeffery Ashmore, 2017 T. C. Memo. 233, filed 11/27/17, and how his bankruptcy discharge failed to wipe out the overstated withholding and underreported income with which IRS dinged Benj.

It’s a tangled tale. Benj claimed a refund, IRS gave it him, but hauled it back when the overstated withholding caught up with the return. The return was due April 15, 2010. Remember that date.

But overstated withholding is directly assessable, so no need for a SNOD. See Section 6201(a)(3) and 6213(b)(1). It’s a clerical or mathematical error. But of course Benj could challenge that in a CDP, as he had no prior opportunity, except he didn’t challenge, but relied on the bankruptcy discharge he’d gotten..

Meanwhile, Benj did get a SNOD for $20K of unreported income, petitioned that, but while that one was wending its way through Tax Court, Benj filed bankruptcy on April 8, 2013. Remember that date. Benj got a discharge in November, 2013, but IRS never filed proof of claim, and the tax liabilities were never adjudicated.

Benj gets dinged for the unreported and the overstated withholding post-discharge, but Bankruptcy Court reopens his case in 2016 for the limited purpose of dealing with a whistleblower (nontax) case, where Benj might get some cash.

Benj claims automatic stay. Nope, says STJ Panuthos.

When a case is closed in Bankruptcy Court, reopening doesn‘t impose the automatic stay unless the Bankruptcy Court so orders, and they didn’t.

And Benj’s discharge doesn’t cover the tax liabilities, all of which involve tax year 2009, when he underreported income and overstated withholding.

“A debtor’s discharge under 11 U.S.C. sec. 727 does not include debts for taxes of the kind and for the periods specified in 11 U.S.C. sec. 507(a)(8)(A).  See id. sec. 523(a)(1)(A).  The taxes that are not dischargeable under that provision include (1) income tax which became due within three years before the date that the bankruptcy was filed, (2) income tax assessed within 240 days of the date the bankruptcy was filed, and (3) income tax not assessed before the bankruptcy was filed but still assessable thereafter.  See id. sec. 507(a)(8)(A).  In other words, taxes which fall within any of the three exceptions listed in 11 U.S.C. sec. 507(a)(8)(A) are not dischargeable and can be collected by the IRS.  See Turner v. United States (In re Turner), 182 B.R. 317, 321 (N.D. Ala. 1995).” 2017 T. C. Memo. 233, at p. 20.

Remember those dates?

STJ Panuthos does.

“Petitioner’s 2009 Form 1040 was due April 15, 2010, which is less than three years before April 8, 2013, the date of the filing of his bankruptcy petition. Thus, petitioner’s 2009 liability was not dischargeable and can be collected by the IRS.  See 11 U.S.C. sec. 507(a)(8)(A)(i); Turner, 182 B.R. at 321.  We are satisfied that there is no material dispute of fact and that as a matter of law the Appeals Office correctly concluded that petitioner’s tax debt for taxable year 2009 was not discharged in his bankruptcy proceeding.  Therefore, we conclude that the decision to sustain the levy was not an abuse of discretion.” 2017 T. C. Memo. 233, at p. 20.

Read the Turner case, abovecited. If Benj had waited another week before dropping the bankruptcy petition, he’d be home free.

 

 

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