In re Hindenlang
| Decision Date | 24 February 1997 |
| Docket Number | Bankruptcy No. 96-10250,Adv. No. 96-1028. |
| Citation | 205 BR 874 |
| Parties | In re William C. HINDENLANG, Debtor. William C. HINDENLANG, Plaintiff, v. UNITED STATES of America, Defendant. |
| Court | U.S. Bankruptcy Court — Southern District of Ohio |
Alan J. Statman, Cincinnati, OH, for Plaintiff.
Gregory S. Nickerson, U.S. Department of Justice, Washington, DC, for IRS.
DECISION ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
This adversary proceeding relates to the dischargeability of certain federal income tax debts in the plaintiff/debtor's Chapter 7 bankruptcy case filed on January 22, 1996. This court has jurisdiction of this matter pursuant to 28 U.S.C. § 1334(b) and the General Order of Reference entered in this District. This is a core proceeding arising under 28 U.S.C. § 157(b)(2)(F).
The plaintiff's complaint in this adversary proceeding requests a determination of the dischargeability of his federal income tax liability. In this complaint, plaintiff asserts that the following tax debts to the Internal Revenue Service ("IRS") were listed in his schedules and are dischargeable:
1985- $14,949.26
1986- 21,621.64
1987- 12,043.47
1988- 16,879.65
1989- 5,916.12
1991- 4,524.61
1992- 890.49
Plaintiff asserts in his complaint that he filed with the IRS the requested returns for the above years at least three years prior to the filing of his bankruptcy petition. Thus, he contends that the taxes are dischargeable under 11 U.S.C. § 727(a). In response, IRS answers that any taxes due are nondischargeable pursuant to 11 U.S.C. § 523(a)(1), contending first, that the document filed by plaintiff cannot be regarded as a tax return, and, second, that the plaintiff's failure to file his 1985-1988 tax returns prior to being assessed by the IRS for those taxes prevents consideration of what was filed as being a tax return. The parties are now in agreement that the tax liabilities for 1989 and 1991 are dischargeable, and that the tax liability for 1992 is nondischargeable under 11 U.S.C. § 523(a)(1) as a tax that was due within three years prior to the petition date.
Now before the court are cross-motions for summary judgment on the dischargeability of the tax liability for the years 1985-1988, and the parties' responses thereto. With his motion for summary judgment, plaintiff/debtor filed copies of amended Forms 1040 for the years here in controversy, 1985 through 1989. (In a Stipulation filed with the court, Document 14 in the file, the parties agree that these were received by IRS on December 6, 1993.) With its motion, IRS filed a number of exhibits, including the same forms submitted by plaintiff, and also Certificates of Assessment for each of the years 1985-1988 and also 1992; "30-day Letters" with attached proposed tax and penalties for each of the years 1985-1988; Notices of Deficiency for years 1985-1987; and a transcript of the deposition of plaintiff.
We find the following facts. The plaintiff did not timely file tax returns for the years 1985-1988. The IRS sent "30-day letters" to the plaintiff requesting that the plaintiff consent to the taxes which the IRS calculated with "Substitutes for Return" or explain why the tax liabilities should be different from the calculated amounts. These letters were sent on April 12, 1990 for the tax years 1985 and 1986, April 26, 1990 for the tax year 1987, and December 31, 1990 for the tax year 1988. The IRS then sent Notices of Deficiency to the plaintiff between August and December of 1990 requesting again that the plaintiff consent to its calculation of the taxes, or, in the alternative, that the plaintiff file a petition in the U.S. Tax Court within 90 days to avoid assessment of the taxes as calculated by the IRS. The plaintiff filed tax returns for the years 1985-1988 received by IRS on December 6, 1993. The documents filed by the plaintiff on December 6, 1993, were substantially similar to the "Substitutes for Return" earlier prepared by IRS. The parties have agreed that plaintiff's taxes for 1989 and 1991 are dischargeable, and that for 1992 is nondischargeable. What remains in issue is dischargeability of taxes for 1985, 1986, 1987 and 1988.
On these facts, plaintiff argues that the tax liability for the years 1985-1988 is dischargeable under 11 U.S.C. § 727(a) because there is no basis for excepting the tax debt from discharge under 11 U.S.C. § 523(a)(1). Plaintiff states that he filed tax returns for years 1985-1988 in December of 1993. He contends that because he actually filed returns and because this filing was more than two years prior to the filing of his bankruptcy petition the exceptions to discharge in § 523(a)(1) do not apply. In addition, he contends that the exceptions incorporated into § 523(a)(1) from 11 U.S.C. § 507(a)(8) do not apply since the taxes from 1985-1988 were due more than three years prior to the petition date.
Addressing the dischargeability of the tax liability for the years 1985-1988, IRS contends in its memorandum that the taxes are nondischargeable under 11 U.S.C. § 523(a)(1)(B)(i) on the basis that no returns were filed by plaintiff. IRS argues that the documents which were received by IRS on December 6, 1993, were not returns because they were based on the IRS SFRs and were not self-assessed by plaintiff. Further, IRS asserts that because plaintiff's returns were filed after IRS assessed plaintiff's tax liability, plaintiff's right to file a return was extinguished, what plaintiff filed cannot be regarded as a return, and plaintiff's tax liability must be excepted from discharge under § 523(a)(1)(B)(i).
A motion for summary judgment should be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c), made applicable in bankruptcy by Fed. R.Bankr.P. 7056. The moving party bears the initial burden of showing that there is no issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323-324, 106 S.Ct. 2548, 2552-2553, 91 L.Ed.2d 265 (1986).
Under § 523(a)(1)(A) of the Bankruptcy Code, taxes are excepted from discharge if they first became due within three years of the date of the bankruptcy petition. See 11 U.S.C. § 507(a)(8). Section 523(a)(1)(B) further excepts from discharge taxes:
The burden of proving that a debt is nondischargeable is on the party opposing discharge, here IRS. In re Black, 787 F.2d 503, 505 (10th Cir.1986).
The first position of IRS with which we deal is its contention that, since the filings of tax returns were not based on self-assessment, they should not be regarded as tax returns. We hold this position to be without merit. Supreme Court precedent establishes that a proper return must have the following attributes: (1) it must purport to be a return; (2) it must be sworn to as such; (3) it must contain sufficient data to allow calculation of tax; and (4) it must appear on its face to constitute an honest and genuine endeavor to satisfy the law. See Germantown Trust Co. v. Comm'r., 309 U.S. 304, 60 S.Ct. 566, 84 L.Ed. 770 (1940); Zellerbach Paper Co. v. Helvering, 293 U.S. 172, 55 S.Ct. 127, 79 L.Ed. 264 (1934); see also Beard v. Comm'r., 82 T.C. 766, 1984 WL 15573 (1984), aff'd, 793 F.2d 139 (6th Cir.1986).
The IRS does not appear to dispute that the returns submitted by plaintiff in 1993 were proper Forms 1040, were executed and sworn to by plaintiff, contained sufficient information to calculate the tax and were not facially irregular or otherwise fraudulent. In fact, the IRS accepted similar Forms 1040 for the years 1989 through 1992, which were filed on the same day as the Forms 1040 for the years 1985 through 1988. Moreover, the IRS does not assert that the form or substance of the returns interfered with the handling or verification of the tax returns. The first position of IRS fails.
The cases upon which IRS relies for a contrary conclusion in its first position we find unpersuasive. The case of In re Arenson, 134 B.R. 934 (Bankr.D.Neb.1991) is distinguishable because in debtor's amended return after assessment, he contended that he had no liability whatever, while in the case at hand debtor admitted significant tax liability. Moreover, it is unclear whether the holding is based on infirmity in the type of forms filed, or untimeliness of the forms. In In re Pruitt, 107 B.R. 764 (Bankr.D.Wyo.1989), debtor filed no return at all, so that case is simply inapposite to that before us here.
We turn then to the contention of IRS that plaintiff's amended returns should not be regarded as returns for dischargeability purposes because they were filed after the IRS had assessed his taxes for 1985-1988 and issued SFRs for those years. We find this contention also to be without merit. When a statute is clear in its plain language, the court need not go any further in interpretation of the statute. United States v. Ron Pair Enterprises, 489 U.S. 235, 242, 109 S.Ct. 1026, 1031, 103 L.Ed.2d 290 (1989). The position of the IRS would result in this court placing a significant additional requirement on the taxpayer to avoid nondischargeability, that is, filing a return prior to assessment. Such a requirement is not expressed in the statute, and we will not interpret the statute to so...
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