Golden v. United States (In re Golden)

• Decision Date: 27 April 2022
• Docket Number: Case No. 14-24616-E-13,Adv. Proc. No. 21-2012
• Citation: 641 B.R. 392
• Parties: IN RE Nicole GOLDEN and Stephen M. Alter, Debtors. Nicole Golden and Stephen Alter, Plaintiffs, v. United States of America (Internal Revenue Service), Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of California

641 B.R. 392

IN RE Nicole GOLDEN and Stephen M. Alter, Debtors.Nicole Golden and Stephen Alter, Plaintiffs,

v.United States of America (Internal Revenue Service), Defendant.

Case No. 14-24616-E-13

Adv. Proc. No. 21-2012

United States Bankruptcy Court, E.D. California.

Signed April 27, 2022

Office of the U.S. Trustee, Robert T. Matsui United States Courthouse, 501 I Street, Room 7-500, Sacramento, CA 95814, for Bankruptcy Trustee.

Ty Halasz, Esq., P.O. Box 683, Ben Franklin Station, Washington, DC 20044, for Attorney for the Trustee.

Joint Memorandum Opinion and Decision For:

Defendant-IRS Motion for Summary Judgment DCN: none given; Docket Entry No. 17 and Plaintiff-Debtor Countermotion for Summary Judgment DCN: JGD-10; Docket Entry No. 28

JOINT MEMORANDUM OPINION AND DECISION GRANTING PLAINTIFF-DEBTOR'S COUNTERMOTION FOR SUMMARY JUDGMENT AND DENYING DEFENDANT-IRS’ MOTION FOR SUMMARY JUDGMENT

Ronald H. Sargis, United States Bankruptcy Judge

Nicole Golden and Stephen Alter (collectively the "Plaintiff-Debtor") filed the instant adversary proceeding on February 8, 2021, against the United States of America (Internal Revenue Service) "Defendant-IRS."¹ The Complaint, Dckt. 1, begins with a statement that the Adversary Proceeding is brought as provided in Federal Rule of Bankruptcy Procedure 7001(2), requiring an adversary proceeding to determine the extent, validity, and priority of a lien or interest in property (with stated exceptions not applicable here), and 7001(6), requiring an adversary proceeding to determine the dischargeability of the 2008 tax year federal tax debt. Complaint, ¶ 1; Dckt. 1.

The Complaint then lays out in a short and plain statement ( Ashcroft v. Iqbal , 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ) the factual and legal bases upon which Plaintiff-Debtor asserts the right to a determination that the 2008 federal tax obligation was discharged in Debtor's Chapter 13 case.

In response, Defendant-IRS filed its answer (Dckt. 7) on March 15, 2021, admitting and denying specific allegations in the Complaint. Defendant-IRS admits the allegations that this is a core matter proceeding as provided in 28 U.S.C. § 157(b)(I) and that federal court jurisdiction arises under 28 U.S.C. § 1334.

The Parties also affirmatively stated on the record that they each consent to the bankruptcy judge entering all final orders and judgment in this Adversary Proceeding for all claims in the Complaint as filed (Dckt. 1) to the extent that any matters therein would be non-core matters. Civil Minutes and Order; Dckts. 11, 12.

Filing of Motion and Countermotion for Summary Judgment

On December 3, 2021, Defendant-IRS filed a Motion for Summary Judgment requesting a determination that Plaintiff-Debtor's obligations for the 2008 tax year claim are nondischargeable as provided in 11 U.S.C. § 523(a)(1)(B). Dckt. 17.

On December 3, 2021, Plaintiff-Debtor filed a Motion for Summary Judgment ("Countermotion for Summary Judgment") requesting a determination that the tax obligations for the 2008 tax year were discharged in Plaintiff-Debtor's Chapter 13 case. Dckt. 28.

As addressed below, the Parties have effectively and efficiently availed themselves of the tools available in federal litigation, determined that there are no material facts in dispute, and have presented the court with these two motions for summary judgment on non-disputed facts for which complete relief can be granted for one party against the other in this Adversary Proceeding.

Issuance of a Joint Memorandum Opinion and Decision

In light of the Motion for Summary Judgment and the Countermotion for Summary Judgment being based on the same facts not in dispute and the same legal bases, the court issues one Joint Memorandum Opinion and Decision, which will be separately filed for each summary judgment motion and a separate order thereon.

REVIEW OF THE DEFENDANT-IRS MOTION FOR SUMMARY JUDGMENT

For Defendant-IRS’ Motion for Summary Judgment, the grounds stated with particularity, as required by Federal Rule of Civil Procedure 7(b), which is incorporated into Federal Rule of Bankruptcy Procedure 7007, upon which Defendant-IRS asserts that judgment determining that the 2008 tax debt is nondischargeable are:

A. Defendant-IRS moves for summary judgment. Motion for Summary Judgment, p. 1:23-25; Dckt. 17.

B. Defendant-IRS states the legal conclusion that it is entitled to a judgment as a matter of law because the 2008 income tax assessment is "exempt" from discharge under 11 U.S.C. § 523(a)(1)(B)(i). Id ., p. 1:26-27, 2:1.

Congress provides in 11 U.S.C. § 523(a)(1)(B)(i) the grounds for when a tax obligation is nondischargeable for which a return, or equivalent report or notice, if required, was not filed or given.

C. Defendant-IRS asserts that since the 2008 taxes were assessed prior to a return being filed, its claim for 2008 taxes is exempt from discharge because it is not a debt relating to a return filed, but an assessed tax obligation. Id ., p. 2:1-3.

Response of Plaintiff-Debtor

No opposition to Defendant-IRS’ Motion for Summary Judgment has been filed by Plaintiff-Debtor. See L.B.R. 7056-1(b). However, Plaintiff-Debtor filed the Countermotion for Summary Judgment, using a separate docket control number (DCN: JGD-10) as required by Local Bankruptcy Rule 9014-1(c)(4). As provided in Local Bankruptcy Rule 01-4-1(i), if a countermotion is filed, it is to be set for hearing at the same time at the original motion so that the parties and court can address them in tandem.

For the Motion for Summary Judgment and the Countermotion for Summary Judgment, the Parties are arguing different sides of the same coin, each motion effectively serving as an opposition to the other.

Review of Plaintiff-Debtor's Countermotion for Summary Judgment

In the Countermotion for Summary Judgment filed by Plaintiff-Debtor, the grounds stated with particularity, as required by Federal Rule of Civil Procedure 7(b) and Federal Rule of Bankruptcy Procedure 7007, are:

A. Plaintiff-Debtor contends that the amounts alleged to be owed for 2008, which was listed by the IRS as a general unsecured claim, were discharged as a result of their completion of their Chapter 13 Plan. Plaintiff-Debtor Motion, p. 1:24-26; Dckt. 28.

B. The Motion is and shall be based on this Motion, and the Notice of Motion, Memorandum of Points & Authorities, Separate Statement of Undisputed, Declaration of Stephen Michael Alter, each concurrently filed in support of this Motion, and such other matters as may be presented at or before the hearing of this matter. Id ., p. 2:3-6.

Thus, in substance, there are no grounds stated in the Countermotion for Summary Judgment. Rather, the court is instructed to read the Motion, read the Notice of Motion, read the Memorandum of Points and Authorities, read the Separate Statement of Undisputed Facts, read the Declaration of Stephen Alter, and read whatever else Plaintiff-Debtor chooses to file up to the date of the hearing (though such is not permitted under the Federal Rules of Civil Procedure, Federal Rules of Bankruptcy Procedure, and Local Bankruptcy Rules), and then assemble whatever grounds the court thinks that are best for Plaintiff-Debtor.

Though the court generally does not so do, in light of the Parties having reached an agreed statement of undisputed facts and their efforts to effectively prosecute this litigation, there appearing only the determination of legal issues to rule on the Motion and Countermotion, and the Points and Authorities for the Countermotion for Summary Judgment containing a separate statement of the grounds, the court will "assemble" and state the grounds for the Countermotion for Summary Judgment.

Grounds From the Memorandum of Points and Authorities

In the Points and Authorities filed by Plaintiff-Debtor, there is a section titled "Relevant Facts" which appears to state the factual grounds (not legal authorities and points/arguments) that are to be stated with particularity in the Motion. Using that portion of the Points and Authorities, the grounds stated by Plaintiff-Debtor are:

1. In 2008, Plaintiff-Debtor began experiencing financial difficulties. A rental property they owned was foreclosed on. The financial difficulties adversely affected their jointly owned and operated business, All Seasons Concierge. The financial difficulties adversely affected their marriage.

2. On April 15, 2009, Plaintiff-Debtor filed a Request for Extension of Time, extending the date for filing the 2008 Tax Return to October 15, 2009.

3. In February 2010, Plaintiff-Debtor, whose daughters at the time were 4 and 6, permanently separated. Nicole Golden alone began operating the Business as a sole proprietorship. It took time for Ms. Golden to take over the tax responsibilities, which had previously been Stephen Alter's responsibility. This was another extremely difficult year for Plaintiff-Debtor, personally and financially.

4. On March 8, 2011, Plaintiff-Debtor filed their 2009 Tax Return.

5. On March 10, 2011, Plaintiff-Debtor's tax preparer Jean Barnett completed Plaintiff-Debtor's 2008 Individual Income Tax Return (the "2008 Late Return"),² showing a total tax of $23,377 and a Balance Due of $23,040. Barnett and Plaintiff-Debtor signed the Return on March 10, 2011.

6. On March 14, 2011, Defendant-IRS sent a letter to Plaintiff-Debtor asserting that there was a tax deficiency of $276,506, which was based primarily on Self-Employment Income of $760,199.00.

7. Although the 2008 Return had been completed prior to receiving the March 14, 2011 Letter from Defendant-IRS, Plaintiff-Debtor held off on filing the return in an effort to put together the money to pay off the taxes and to understand the basis for Defendant-IRS position.

8. On August 10, 2011, Defendant-IRS received the 2008 Return. This return showed Gross Income of $760,200 for Plaintiff-Debtor's vacation rental business, but a Net Profit of $132,123 after

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