Graham v. Comm'r of Internal Revenue
| Citation | 75 T.C. 389,7 Bankr.Ct.Dec. 16 |
| Decision Date | 16 December 1980 |
| Docket Number | Docket No. 7670-78. |
| Parties | RALPH B. GRAHAM, JR., PETITIONER v. COMMISSIONER of INTERNAL REVENUE, RESPONDENT |
| Court | United States Tax Court |
OPINION TEXT STARTS HERE
An income tax audit for prebankruptcy years (1972 and 1973) began and a 30-day letter was issued prior to the filing of a voluntary bankruptcy petition in a no-asset estate. Respondent did not make an immediate assessment pursuant to sec. 6871(a), I.R.C. 1954, or file a proof of claim with the bankruptcy court, and no application was filed in the bankruptcy proceeding to determine the dischargeability of petitioner's tax liability for the prebank__ruptcy years. The bankrupt was discharged, and the proceeding was closed. Shortly thereafter, respondent sent petitioner a notice of deficiency for the prebankruptcy years, and a timely petition was filed with the Tax Court. Held:
1. The Tax Court has jurisdiction to redetermine the deficiencies and additions to tax. Orenduff v. Commissioner, 49 T.C. 329 (1968), followed.
2. The Tax Court lacks the requisite subject matter jurisdiction to decide whether the deficiencies and additions to tax were discharged in the bankruptcy proceeding. Ralph B. Graham, Jr., pro se.
Cynthia J. Olson and John B. Franklin, for the respondent.
Judge: Respondent determined deficiencies in petitioner's Federal income taxes and additions to tax, as follows:
+-------------------------------------------------+
¦ ¦ ¦Additions to tax 1 ¦
+------+------------+-----------------------------¦
¦Year ¦Deficiency ¦Sec. 6651(a) ¦Sec. 6653(a) ¦
+------+------------+--------------+--------------¦
¦ ¦ ¦ ¦ ¦
+------+------------+--------------+--------------¦
¦1972 ¦$4,851 ¦$944 ¦$361 ¦
+------+------------+--------------+--------------¦
¦1973 ¦10,489 ¦1,573 ¦524 ¦
+-------------------------------------------------+
Since the petitioner has agreed to the correctness of the deficiencies and additions to tax, we are only confronted here with jurisdictional issues. They are:
(1) Whether this Court has jurisdiction to redetermine Federal income tax deficiencies and additions to tax with respect to prebankruptcy years when they were not assessed under section 6871(a), not claimed by respondent in the no-assets bankruptcy proceeding, not contested by the bankrupt in the bankruptcy proceeding, and the notice of deficiency was mailed, and the petition filed in the Tax Court after the bankruptcy proceeding was terminated.
(2) Whether this Court has the requisite subject matter jurisdiction to decide whether the deficiencies and additions to tax in question were discharged in the bankruptcy proceeding.
(3) If we do have jurisdiction to decide the dischargeability question, whether section 17a of the Bankruptcy Act, 11 U.S.C. sec. 35(a) () operated to exempt the Federal income tax deficiencies and additions to tax for the prebankruptcy years from the effect of petitioner's discharge in bankruptcy.
All of the facts have been stipulated and are so found. The pertinent facts are summarized below.
Ralph B. Graham, Jr. (petitioner), was a resident of Las Vegas, Nev., when he filed his petition in this case.
After filing an application for an automatic extension of time and after receiving from the Director, Internal Revenue Service Center, Ogden, Utah, a Form 4903 (Request for Information about Tax Form—-Third Notice), the petitioner filed his Federal income tax return for the year 1972 on April 15, 1974. Also, after requesting an automatic extension of time, the petitioner filed his 1973 Federal income tax return with the Internal Revenue Service Center at Ogden on June 18, 1974.
Petitioner's Federal income tax returns for 1972 and 1973 were later examined by respondent's agents. On December 20, 1976, in order to prevent the interruption of the audit and conference procedures then in progress, petitioner and his now-estranged wife, Laura L. Graham,2 signed a consent (Form 872) extending the period for assessment of the 1972 and 1973 income taxes to April 15, 1978.
Respondent mailed on April 18, 1977, a 30-day letter, including a copy of the examination report, proposing adjustments to petitioner's income taxes for 1972 and 1973. By letter dated July 11, 1977, the petitioner protested the adjustments proposed in the 30-day letter.
On November 18, 1977, the petitioner filed a petition for voluntary bankruptcy in the U.S. District Court for the District of Oregon. On November 25, 1977, the bankruptcy clerk mailed to the District Director of Internal Revenue, Portland, Ore., a notice of the order for first meeting of creditors, which provided, in part, as follows:
3. February 6, 1978 is fixed as the last day for the filing of objections to the discharge of the bankrupt.
4. February 6, 1978 is fixed as the last day for the filing of a complaint to determine the dischargeability of any debt pursuant to §17c(2) of the Bankruptcy Act.
* * * * * * *
IT APPEARS FROM THE SCHEDULES OF THE BANKRUPT THAT THERE ARE NO ASSETS FROM WHICH ANY DIVIDEND CAN BE PAID TO CREDITORS. IT IS UNNECESSARY FOR ANY CREDITOR TO FILE HIS CLAIM AT THIS TIME IN ORDER TO SHARE IN ANY DISTRIBUTION FROM THE ESTATE. IF IT SUBSEQUENTLY APPEARS THAT THERE ARE ASSETS FROM WHICH A DIVIDEND MAY BE PAID, CREDITORS WILL BE SO NOTIFIED AND GIVEN AN OPPORTUNITY TO FILE THEIR CLAIMS.
The District Director, acting for respondent herein, did not file a proof of claim in petitioner's bankruptcy proceeding. Neither petitioner nor respondent filed an application in the bankruptcy proceeding to determine the dischargeability of petitioner's tax liability for the years 1972 and 1973.
On February 7, 1978, petitioner was granted a discharge in bankruptcy, which reads, in part, as follows:
1. The above-named bankrupt is released from all dischargeable debts.
2. Any judgement heretofore or hereafter obtained in any court other than this court is null and void as a determination of the personal liability of the bankrupt with respect to any of the following:
(a) debts dischargeable under §17a and b of the Bankrupcy Act;
(b) unless heretofore or hereafter determined by order of this court to be nondischargeable, debts alleged to be excepted from discharge under clauses (2) and (4) of §17a of the Act;
(c) unless heretofore or hereafter determined by order of this court to be nondischargeable, debts alleged to be excepted from discharge under clause (8) of §17a of the Act, except those debts on which there was an action pending on the date when the petition was filed as specified above in which a right to jury trial existed and a party has either made a timely demand therefor or has submitted to this court a signed statement of intention to make such a demand;
(d) debts determined by this court to be discharged under §17c(3) of the Act.
3. All creditors whose debts are discharged by this order and all creditors whose judgments are declared null and void by paragraph 2 above are enjoined from instituting or continuing any action or employing any process to collect such debts as personal liabilities of the above-named bankrupt.
The bankruptcy Judge determined that no assets could be recovered out of the bankrupt's estate, and the estate was closed on February 8, 1978.
On April 10, 1978, respondent mailed to petitioner a notice setting forth deficiencies in income taxes and additions to tax for the years 1972 and 1973. The deficiencies resulted from respondent's determination of omitted gross income for both years and his disallowance of certain deductions claimed on petitioner's income tax return for 1973. A petition was timely filed in the Tax Court on June 29, 1978. Respondent has not assessed these deficiencies and additions to tax.
Petitioner made no attempt to contest his proposed tax deficiencies in the bankruptcy proceeding. He does not now contest the adjustments to income made by respondent in the notice of deficiency dated April 10, 1978, nor does he contest the additions to tax as set forth therein.
Initially, we must decide in these particular circumstances if this Court has jurisdiction to redetermine the deficiencies and additions to tax, which the petitioner no longer contests. Our decision on this issue depends to a major degree upon whether our opinion in Orenduff v. Commissioner, 49 T.C. 329 (1968), is still viable in view of the rationale of our more recent opinions in Sharpe v. Commissioner, 69 T.C. 19 (1977); Tatum v. Commissioner, 69 T.C. 81 (1977), affd. 612 F.2d 193 (5th Cir. 1980); Baron v. Commissioner, 71 T.C. 1028 (1979).
Section 6871(a) provides:
IMMEDIATE ASSESSMENT.—- Upon the adjudication of bankruptcy of any taxpayer in any liquidating proceeding, * * * any deficiency (together with all interest, additional amounts, or additions to the tax provided by law) determined by the Secretary in respect of a tax imposed by subtitle A or B upon such taxpayer shall, despite the restrictions imposed by section 6213(a) upon assessments, be immediately assessed if such deficiency has not theretofore been assessed in accordance with law.
Section 6871(b) provides:
CLAIM FILED DESPITE PENDENCY OF TAX COURT PROCEEDINGS. —-In the case of a tax imposed by subtitle A or B claims for the deficiency and such interest, additional amounts, and additions to the tax may be presented, for adjudication in accordance with law, to the court before which the bankruptcy or receivership proceeding is pending, despite the pendency of proceedings for the redetermination of the deficiency in pursuance of a petition to the Tax Court; but no petition for any such redetermination shall be filed with the Tax Court after the adjudication of bankruptcy, the filing or (where approval is required by the Bankruptcy A...
To continue reading
Request your trial
-
Swanson v. Comm'r of Internal Revenue
...in a bankruptcy proceeding instituted by such taxpayer. Neilson v. Commissioner, 94 T.C. 1, 9, 1990 WL 61 (1990); Graham v. Commissioner, 75 T.C. 389, 399, 1980 WL 4429 (1980). In so holding, we relied on Swanson v. Commissioner, 65 T.C. 1180, 1184, 1976 WL 3764 (1976), in which we observed......
-
Swanson v. Commissioner of Internal Revenue, 6440-01L.
...tax liability in a bankruptcy proceeding instituted by such taxpayer. Neilson v. Commissioner, 94 T.C. 1, 9 (1990); Graham v. Commissioner, 75 T.C. 389, 399 (1980). In so holding, we relied on Swanson v. Commissioner, 65 T.C. 1180, 1184 (1976), in which we observed that an action brought fo......
-
In re Otto
...effect of a bankruptcy discharge to an asserted tax claim. See Harding v. Commissioner, 1989 WL 25038 (1989); Graham v. Commissioner, 75 T.C. 389, 399, 1980 WL 4429 (1980). However, in Washington v. Commissioner, 120 T.C. 114, 119-21, 2003 WL 840965 (2003), the Tax Court distinguished the a......
-
Washington v. Comm'r of Internal Revenue
...in a bankruptcy proceeding instituted by such taxpayer. Neilson v. Commissioner, 94 T.C. 1, 9, 1990 WL 61 (1990); Graham v. Commissioner, 75 T.C. 389, 399, 1980 WL 4429 (1980). In so holding, we relied on Swanson v. Commissioner, 65 T.C. 1180, 1184, 1976 WL 3764 (1976), in which we observed......