Fernandez v. United States (In re Fernandez)
| Decision Date | 25 October 2012 |
| Docket Number | Case No. 09-32896-HCM,Adv. No. 12-3015-HCM |
| Parties | In re: ALFRED L. FERNANDEZ Debtor. ALFRED L. FERNANDEZ, Plaintiff v. UNITED STATES OF AMERICA (INTERNAL REVENUE SERVICE), Defendant. |
| Court | U.S. Bankruptcy Court — Western District of Texas |
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H. CHRISTOPHER MOTT
This adversary proceeding has been brought by plaintiff, debtor and taxpayer Alfred L. Fernandez ("Plaintiff") against defendant United States of America, on behalf of the Internal Revenue Service ("Defendant" or "IRS"). Plaintiff filed this adversary proceeding to determine whether his federal income tax liabilities for the years 2003 and 2004 were discharged in this Chapter 7 bankruptcy case. Defendant has filed a Motion for Summary Judgment. For the reasons stated in this Memorandum Opinion, the Court grants the Motion for Summary Judgment (DE #7) filed by Defendant.
On July 2, 2012, Plaintiff initiated this adversary proceeding by filing his Complaint to Determine Dischargeability of Income Taxes ("Complaint") (DE #1). In general, through the Complaint, Plaintiff requests the Court to determine that his federal tax obligations for the 2003 tax year and the 2004 tax year in the amount of approximately $60,520 ("Taxes") have been discharged in his Chapter 7 bankruptcy case. On July 23, 2012, Defendant filed its Answer to the Complaint ("Answer") (DE #3). In general, in its Answer, Defendant denied that the federal tax liabilities of Plaintiff for 2003 and 2004 have been discharged in this Chapter 7 bankruptcy case based on §523(a)(1)(B) of the Bankruptcy Code.
On September 25, 2012, Defendant filed a Motion for Summary Judgment and Supporting Memorandum ("Motion"), together with a supporting Declaration and Exhibits (DE #7). On October 9, 2012, Plaintiff filed its Response to the Motion ("Response") with Exhibit (DE #10). On October 12, 2012, Defendant filed its Reply to such Response ("Reply") (DE #11).
The Court has jurisdiction over this adversary proceeding under 28 U.S.C §157 and §1334. This adversary proceeding is a "core proceeding" under 28 U.S.C. §157(b)(2)(I), and the Court is authorized to enter a final judgment in this adversary proceeding under 28 U.S.C. §157(b)(1).
Rule 56 of the Federal Rules of Civil Procedure ("FRCP"), which governs a motion for summary judgment, is incorporated into Rule 7056 of the Federal Rules of Bankruptcy Procedure ("Bankruptcy Rules").
Summary judgment is appropriate when a movant shows that no genuine issue of material fact exists and that movant is entitled to judgment as a matter of law. See FRCP 56(a); Piazza's Seafood World, LLC v. Odom, 448 F.3d 744, 752 (5th Cir. 2006); Placid Oil Co. v. Williams (In re Placid Oil Co.), 450 B.R. 606, 612 (Bankr. N.D. Tex.2011). A genuine issue of material fact is present when the evidence is such that a reasonable fact finder could return a verdict for the non-movant. Piazza's Seafood, 448 F.3d at 752 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). Material facts are those that could affect the outcome of the action. Wyatt v. Hunt Plywood Co., Inc., 297 F.3d 405, 409 (5th Cir. 2002), cert. denied, 537 U.S. 1188 (2003).
In the summary judgment context, the court should view evidence in a light most favorable to the non-moving party. Piazza's Seafood, 448 F.3d at 752. Factual controversies should be resolved in favor of the non-movant. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994). If the movant satisfies its burden, the non-movant must then come forward with specific evidence to show that there is a genuine issue of material fact. Placid Oil, 450 B.R. at 613 (citing Ashe v. Corley, 992 F.2d 540, 543 (5th Cir.1993)). The non-movant may not merely rely on conclusory allegations or the pleadings; rather, it must demonstrate specific facts identifying a genuine issue to be tried in order to avoid summary judgment. See FRCP 56(c)(1); Piazza's Seafood, 448 F.3d at 752; Placid Oil, 450 B.R. at 613.
Based on the summary judgment record, the following material facts are not in genuine dispute:
On December 31, 2009, Plaintiff, as debtor, filed a voluntary petition under Chapter 7 of the Bankruptcy Code in this Court, bankruptcy case no. 09-32896. On April 12, 2010, Plaintiff, as debtor, received his Chapter 7 bankruptcy discharge under §727 of the Bankruptcy Code. See Plaintiff's Bankruptcy case no. 09-32896 (DE #1, 10). On July 30, 2010, Defendant filed a Proof of Claim in the bankruptcy case for $60,520 as a general unsecured claim, based on unpaid federal income tax liabilities for the years 2003 and 2004 ("Proof of Claim") (DE #1, pp. 10-11).
With respect to federal taxes for the tax year ending December 31, 2003 ("2003 Taxes"), Plaintiff did not timely file a federal income tax return. On June 25, 2007, the IRS prepared a "substitute tax return" for Plaintiff under §6020(b) of the Internal Revenue Code ("IRC"). See IRS Certified Account Transcripts (DE #7, Ex. 1, p.2; Ex. 2). Plaintiff has not disputed that the IRS prepared a §6020(b) substitute return for the2003 Taxes. Instead, Plaintiff contends that he filed a tax return for the 2003 Taxes by signing a Form 4549 Income Tax Examination Changes dated July 19, 2007 ("Form 4549") and that he was told his tax return for 2003 was officially filed with Defendant on July 29, 2007. See Form 4549 (DE #7, Ex. 4); Response (DE #10, p.5). The IRS Certified Account Transcript for the 2003 tax year does not reflect the filing of any tax return by Plaintiff for the 2003 year. (DE #7, Ex. 1, pp.1-4; Ex. 2). The Form 4549 signed by Plaintiff dated July 19, 2007 is qualified and conditional, as it has several handwritten notations and request for modifications by Plaintiff in various calculations. (DE #7, Ex. 4).
With respect to federal taxes for the tax year ending December 31, 2004 ("2004 Taxes"), Plaintiff filed a federal tax return (Form 1040) dated August 21, 2008 that was received by Defendant IRS on September 3, 2008. See Form 1040 (DE #7, Ex. 5); IRS Certified Account Transcript (DE #7, Ex. 1, p.5). Plaintiff has stated in an Answer to Interrogatories that "to the best of my knowledge, I submitted my 2004 tax return on or before April 15, 2005". See Response (DE #10, p. 5). The IRS Certified Account Transcript for the 2004 tax year does not reflect the filing of any tax return by Plaintiff for the 2004 year until September 3, 2008. Plaintiff's 2004 tax return that is part of the summary judgment record is dated August 21, 2008. (DE #7, Ex. 1, p. 5; Ex. 5, p. 2).
The disputed issue for this Court to determine is whether the unpaid federal income tax liabilities of Plaintiff for the tax year ending December 31, 2003 (herein "2003 Taxes") and for the tax year ending December 31, 2004 (herein "2004 Taxes") in the total amount of approximately $60,520, have been discharged in this Chapter 7 bankruptcy case.
Section 727 of the Bankruptcy Code permits the discharge of debts in a Chapter 7 bankruptcy case, but contains several exceptions. One of the exceptions to debt discharge are certain tax debts set forth in §523 of the Bankruptcy Code. See 11 U.S.C. §727(b); McCoy v. Mississippi State Tax Comm'n (In re McCoy), 666 F.3d 924, 926 (5th Cir. 2012), cert. denied, 81 USLW 3680 (Oct. 1, 2012).
In the Motion, Defendant takes the position that the 2003 Taxes and 2004 Taxes of Plaintiff were not discharged in his bankruptcy case based on the exceptions for certain tax debts contained in §523(a)(1)(B) of the Bankruptcy Code. Conversely, Plaintiff contends that such taxes were discharged and genuine issues of material fact exist that preclude summary judgment in favor of Defendant. As Defendant seeks summary judgment on slightly different grounds with respect to the 2003 Taxes than for the 2004 Taxes, the Court will analyze each tax year separately.
ISSUE #1- Are the 2003 Taxes excepted from discharge under §523(a)(1)(B)(i) of the Bankruptcy Code?
In its Motion, Defendant posits that the 2003 Taxes owed by Plaintiff are excepted from his bankruptcy discharge under §523(a)(1)(B)(i) of the Bankruptcy Code, because a tax "return" for the 2003 tax year was not "filed" by Plaintiff. See Motion (DE# 7, pp.4-5).
In pertinent part, §523(a)(1)(B)(i) of the Bankruptcy Code provides:
11 U.S.C. §523(a)(1)(B)(i) (emphasis added).
The meaning of the term tax "return" for bankruptcy discharge purposes is defined in the Bankruptcy Code. In 2005, Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (hereafter "BAPCPA"). As part of the BAPCPA amendments to the Bankruptcy Code, a hanging paragraph was added to §523(a), which defined the term "return" for bankruptcy discharge purposes. See McCoy, 666 F.3d at 927. This hanging paragraph of §523(a) is often identified as §523(a)(*), and provides:
For purposes of this subsection, the term 'return' means a return that satisfies the requirements of applicable nonbankruptcy law (including applicable filing requirements). Such term includes a return prepared pursuant to section 6020(a) of the Internal Revenue Code of 1986, or similarState or local law, or a written stipulation to a judgment or a final order entered by a nonbankruptcy tribunal, but does not include a return made pursuant to section 6020(b) of the Internal Revenue Code of 1986, or a similar State or local law.
11 U.S.C. §523(a)(*)(emphasis added).
So, the hanging paragraph of §523(a)(*) is very clear in two respects—a tax return prepared by the IRS under §6020(b) of the Internal...
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