220 F.3d 1057 (9th Cir. 2000), 98-35248, In re In Re: James H. Hatton Debtor

Docket Nº:98-35248
Citation:220 F.3d 1057
Party Name:In re: JAMES H. HATTON Debtor. UNITED STATES OF AMERICA, Appellant, v. JAMES H. HATTON, Appellee.
Case Date:August 10, 2000
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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220 F.3d 1057 (9th Cir. 2000)

In re: JAMES H. HATTON Debtor.

UNITED STATES OF AMERICA, Appellant,

v.

JAMES H. HATTON, Appellee.

No. 98-35248

Office of the Circuit Executive

United States Court of Appeals, Ninth Circuit

August 10, 2000

Argued and Submitted August 13, 1999--Seattle, Washington

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Kenneth L. Greene, AUSA, Washington, D.C., for the appellant.

Christopher E. Allen, Esq., Tacoma, Washington, for the appellee.

Appeal from the United States District Court for the Bankruptcy Appellate Panel, Ryan, Hagan, and Russell, Judges, Presiding; BAP No. WW-97-01430-RyHR

Before: William C. Canby, Jr., Melvin Brunetti, and Diarmuid F. O'Scannlain, Circuit Judges.

BRUNETTI, Circuit Judge:

James Hatton ("Hatton") failed to file a federal income tax return in 1983, and the Internal Revenue Service ("IRS") instead prepared a substitute return on his behalf. Hatton then entered into an installment agreement with the IRS, agreeing to tender $200 per month in order to fulfill his outstanding tax liabilities. Before Hatton completed all the payments in the installment agreement, he filed a Chapter 7 bankruptcy petition. The IRS filed a proof of claim in order to recover the remaining unpaid sums under the installment agreement. In response, Hatton filed a motion for an adversary proceeding in order to prove that his tax liabilities should be discharged in bankruptcy. The bankruptcy court agreed and granted summary judgment in favor of Hatton, concluding that Hatton's unpaid tax liabilities were eligible for discharge under section 727 of the Bankruptcy Code. 11 U.S.C. S 727. The Bankruptcy Appellate Panel ("BAP") affirmed the bankruptcy court. We have jurisdiction under 28 U.S.C. S 158(d), and we reverse.

I.

On July 15, 1994, Hatton filed a Chapter 7 bankruptcy petition. In the debt schedules accompanying the petition, Hatton listed his overdue federal tax liabilities for 1983 through 1985 and 1988 through 1990. Although Hatton received a discharge, the IRS still sought to recover the unpaid tax liabilities for the years listed on Hatton's

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debt schedules. The IRS ultimately admitted that the tax liabilities for all years except 1983 were dischargeable. The IRS alleged, however, that the 1983 liabilities were not discharged, and that, because its claim for the 1983 tax year was secured, it could proceed against Hatton's exempt and abandoned property. Hatton then filed a motion for summary judgment, arguing that his tax liabilities, including those incurred in 1983, were discharged in bankruptcy. The government opposed Hatton's motion, arguing that Hatton's 1983 tax liabilities were nondischargeable under 11 U.S.C. S 523(a)(1)(B)(i) because Hatton never filed a tax return for the 1983 tax year. The relevant facts surrounding the motion are not in dispute.

Hatton failed to file a federal income tax return for the 1983 tax year. As a result, the IRS prepared a substitute return on Hatton's behalf pursuant to section 6020(b) of the Internal Revenue Code ("I.R.C."). 26 U.S.C. S 6020(b). The IRS completed the substitute tax return based on information it had obtained from sources other than Hatton. The IRS determined that Hatton had an unpaid tax liability...

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