Hopkins, In re, No. 97-15936

• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)
• Writing for the Court: GOODWIN
• Citation: 146 F.3d 729
• Parties: -2388, 98-2 USTC P 50,492, 40 Collier Bankr.Cas.2d 306, 98 Cal. Daily Op. Serv. 4632, 98 Daily Journal D.A.R. 6587, 2 Cal. Bankr. Ct. Rep. 32 In re Marianne HOPKINS, Debtor. Marianne HOPKINS, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.
• Docket Number: No. 97-15936
• Decision Date: 17 June 1998

Page 729

146 F.3d 729 81 A.F.T.R.2d 98-2388, 98-2 USTC P 50,492,
40 Collier Bankr.Cas.2d 306,
98 Cal. Daily Op. Serv. 4632,
98 Daily Journal D.A.R. 6587,
2 Cal. Bankr. Ct. Rep. 32 In re Marianne HOPKINS, Debtor.
Marianne HOPKINS, Plaintiff-Appellant,
v.
UNITED STATES of America, Defendant-Appellee. No. 97-15936. United States Court of Appeals,
Ninth Circuit. Argued and Submitted April 16, 1998.
Decided June 17, 1998.

Page 730

Eric M. Nixdorf, Law Offices of Stephen M. Moskowicz, San Francisco, California, for the plaintiff-appellant.

Laurie A. Snyder, Tax Division, United States Department of Justice, Washington, DC, for the defendant-appellee.

Appeal from the United States District Court for the Northern District of California; William H. Orrick, District Judge, Presiding. D.C. No. CV-96-03982 WHO.

Before: GOODWIN, FLETCHER, and D.W. NELSON, Circuit Judges.

GOODWIN, Circuit Judge:

Chapter 7 debtor, Marianne Hopkins, brought an adversary proceeding against the Internal Revenue Service ("IRS") to void certain tax liens assessed against her separate property because of joint tax returns she and her husband filed for the tax years 1982, 1983, and 1984. Ms. Hopkins argued that she was entitled to relief under the "innocent spouse" provisions of § 6013(e) of the Internal Revenue Code. The bankruptcy court concluded that Ms. Hopkins could not raise an "innocent spouse" defense after already having signed a closing agreement under § 7121(b) of the Internal Revenue Code. The bankruptcy court entered summary judgment in favor of the government, and the district court affirmed. This court has jurisdiction to review the case pursuant to 28 U.S.C. §§ 158(d) and 1291. We affirm.

I.

Ms. Hopkins is now divorced from her husband. However, during the taxable periods at issue, Ms. Hopkins was married and filed joint tax returns with her husband. For the years 1981, 1982, 1983, and 1984, Ms. Hopkins and her husband took deductions on their joint returns in connection with a certain partnership in which her husband was involved. Later, upon auditing the returns, the IRS determined that the deductions were improper.

In 1988, after Ms. Hopkins had separated from her husband, the IRS settled the dispute with Ms. Hopkins' husband. The settlement was embodied in a Form 906 closing agreement which was signed by both Ms. Hopkins and her husband. The terms of the closing agreement allowed Ms. Hopkins and her husband to benefit from a portion of the contested deductions and did not assess any penalties against them in connection with the disallowed deductions. The closing agreement provided in pertinent part:

Under Section 7121 of the Internal Revenue Code Donald K and Marianne Hopkins ... and the Commissioner of Internal Revenue make the following closing agreement:

WHEREAS, the Taxpayers were investors in Far West Drilling Associates ("the Partnership"), beginning with the taxable year 1981.

WHEREAS, the Taxpayers have made cash contributions to the partnership in the total of $67,500.

WHEREAS, the Taxpayers have claimed losses with respect to their interest in the Partnership on their Federal income tax return beginning in the

Page 731

year 1981, the allowance of which are contested by the Commissioner of Internal Revenue.

WHEREAS, the parties wish to resolve with finality the Federal income tax consequences of their investment in the Partnership.

NOW THEREFORE, it is hereby determined and agreed for federal income tax purposes that:

1. The Taxpayers are entitled to an ordinary deduction in the amount of $50,625.00 for the taxable year ending December 31, 1981, with respect to their interest in the Partnership ...

2. The Taxpayers shall be entitled to an ordinary deduction in any taxable year ending subsequent to 1981 equal to the amount of cash payments made by them during such taxable year [determined by reference to another factor] ...

* * * * * *

4. The Taxpayers are not entitled to the investment tax credit with respect to their interest in the Partnership for any taxable year.

* * * * * *

7. No penalty shall be assessed against the taxpayers ... as a result of their interest in the Partnership. The increased interest rate pursuant to I.R.C. § 6621(c) shall apply.

* * * * * *

This agreement is final and conclusive except:

* * * * * *

(1) the matter it relates to may be reopened in the event of fraud, malfeasance, or misrepresentation of material fact;

(2) it is subject to the Internal Revenue Code sections that expressly provide that effect be given to their provisions notwithstanding any other law or rule of law except Code section 7122 ...

* * * * * *

By signing, the above parties certify that they have read and agreed to the terms of this document. (Emphasis added).

On November 7, 1988, in accordance with the closing agreement, the IRS accounted for the disallowed deductions, and made assessments for the additional taxes owed. Along with the tax assessments the IRS also made assessments for interest computed in accordance with § 6621(c). The IRS then filed notices of tax liens against Ms. Hopkins and her husband in Marin County, California, in order to secure payment of the assessments.

In 1995, Ms. Hopkins, who had since divorced her husband, filed a petition for bankruptcy. Ms. Hopkins also filed a complaint seeking a determination that her tax debts were dischargeable in bankruptcy and that the corresponding tax liens entered against her and her husband were unenforceable against her separate property because she was an "innocent spouse" within the meaning of § 6013(e) of the Internal Revenue Code. In support of her claim, Ms. Hopkins alleged that the returns for the tax periods in question substantially understated their tax liabilities, that the understatements were attributable to various deductions taken in connection with a particular partnership that her husband was involved in, and that she did not significantly benefit from the tax understatements.

The government agreed...