In re Savage
| Decision Date | 19 February 1998 |
| Docket Number | Bankruptcy No. 93-20458,BAP No. WY-97-069,Adversary No. 93-2057. |
| Citation | 218 BR 126 |
| Parties | In re Jerry R. SAVAGE, Debtor. Jerry R. SAVAGE, Plaintiff-Appellee, v. INTERNAL REVENUE SERVICE, Defendant-Appellant. |
| Court | U.S. Bankruptcy Appellate Panel, Tenth Circuit |
Submitted on the briefs:*
Aleksander D. Radich, Assistant United States Attorney, Cheyenne, WY, and Susan A. Laughlin, Trial Attorney, Tax Division, Department of Justice, Washington, DC, for Defendant-Appellant.
Rex B. Bushman, Salt Lake City, UT, and Michael F. Chadey, Rock Springs, WY, for Plaintiff-Appellee.
Before CLARK, PEARSON and CORNISH, Bankruptcy Judges.
The Internal Revenue Service ("IRS") appeals a Judgment entered by the United States Bankruptcy Court for the District of Wyoming concluding that (1) a portion of the Debtor's tax debt for 1987, in the amount of $4,563.29, was nondischargeable pursuant to 11 U.S.C. §§ 507(a)(8)(A)(ii) and 523(a)(1)(A)1 because the IRS had assessed the debt within 240 days of the Debtor's petition date; (2) any tax liability for 1987 in excess of $4,563.29 was dischargeable; and (3) the Debtor's debts for taxes for 1982 through 1986 and 1988, plus interest and penalties, were dischargeable. The IRS does not contest the Bankruptcy Court's decision regarding the nondischargeability of the 1987 tax debt in the amount of $4,563.29. Rather, the IRS contends that the Debtor's tax debts for 1982 through 1986 and 1988 are not dischargeable pursuant to § 523(a)(1)(B)(i) because the Debtor did not file tax returns for those years, and that any debt for taxes in excess of $4,563.10 for 1987 is similarly non-dischargeable. We find that the decision of the Bankruptcy Court regarding the dischargeability of the Debtor's tax debts for 1982 through 1985 should be reversed, but that the Bankruptcy Court's decision as to dischargeability of the Debtor's tax debts for 1986 through 1988 should be affirmed.
The Bankruptcy Appellate Panel, with the consent of the parties, has jurisdiction to hear appeals from the final judgments, orders, and decrees of Bankruptcy Judges within this Circuit. 28 U.S.C. § 158(a)(1), (b)(1), (c)(1). The order appealed by the IRS is a "final" order under 28 U.S.C. § 158(a)(1). On October 15, 1997, the District Court for the District of Wyoming entered an Order transferring this case to the Bankruptcy Appellate Panel, with the consent of the parties. Accordingly, this Court has jurisdiction over this appeal.
The Bankruptcy Appellate Panel may affirm, modify or reverse a Bankruptcy Court's Judgment, Order or Decree, or remand with instructions for further proceedings. Fed. R.Bankr.P. 8013. Findings of fact shall not be set aside unless they are clearly erroneous. Pierce v. Underwood, 487 U.S. 552, 558, 108 S.Ct. 2541, 2546, 101 L.Ed.2d 490 (1988); First Bank v. Reid (In re Reid), 757 F.2d 230, 233-34 (10th Cir.1985). Conclusions of law are reviewed de novo. Pierce, 487 U.S. at 558, 108 S.Ct. at 2546.
The Debtor failed to timely file his Form 1040 tax returns for the tax years 1982 through 1988. As a result, the IRS prepared substitute returns for these taxable years, pursuant to 26 U.S.C. § 6020(b)(1). The last substitute return was prepared on April 19, 1990. The IRS sent the Debtor a notice of deficiency for each of the tax years. The notice provided that the Debtor could not file a claim for a refund until he paid the taxes that were due. The Debtor did not file any petitions with the Tax Court. The IRS assessed taxes for the tax years in question as follows:
1982 $2,894.00
1983 $8,332.00
1984 $2,458.00
1985 $4,588.00
1986 $7,007.00
1987 $1,579.00
1988 $3,883.002
The substitute returns prepared by the IRS for 1982 and 1983 reflected an address for the Debtor in Stockton, California. The substitute returns prepared for the remaining years in question reflect an address for the Debtor in Farson, Wyoming. The parties agree that the Debtor's residence was in Farson, Wyoming for all relevant periods subject to this appeal.
On November 6, 1990, the Debtor filed Form 1040 tax returns for the 1986 through 1988 tax years with the IRS's servicing center in Ogden, Utah. Despite language in the IRS's notice of deficiency prohibiting the Debtor from filing a claim for refund until he had paid the taxes that had been assessed against him, these returns were treated by the IRS as amended returns or claims for refund.
On January 17, 1991, the Debtor hand delivered Form 1040 returns for the tax years 1982 through 1988 to the IRS's office in Portland, Oregon. The Bankruptcy Court found that the Debtor filed returns in 1991 for the tax years 1982 through 1988 in the IRS's Portland, Oregon office, despite its finding that the Debtor had filed returns in 1990 in Ogden, Utah for the overlapping tax years of 1986 through 1988. Regardless of these seemingly conflicting factual findings, the Bankruptcy Court found the Debtor's returns for the tax years 1982 through 1985 were filed in Portland, Oregon and the returns for the tax years 1986 through 1988 were filed in Ogden, Utah. It is undisputed that, due to the Debtor's residency in Wyoming, the IRS's Ogden, Utah servicing center was the appropriate place for the Debtor's tax returns to be filed. However, delivery of the returns was not refused by the Portland office, and the returns were not sent back to the Debtor. Although the IRS has no record that these returns were ever filed, the exhibits presented to the Bankruptcy Court apparently had cover sheets that were stamped with an IRS received stamp dated January 17, 1991. Furthermore, although the returns presented to the Bankruptcy Court were unsigned, the Debtor submitted an Affidavit stating that all returns he delivered to the IRS were signed. The Bankruptcy Court found that there was no evidence in the record to contradict his sworn statement, and based on the record before us, we cannot say that this finding was clearly erroneous.
In February of 1993, the IRS made an additional assessment of the Debtor's 1987 taxes ("1993 Additional Assessment"). In addition to amounts that had been assessed by the IRS in or about 1990 for the tax year of 1987, the IRS assessed the Debtor taxes in the amount of $4,563.19. This 1993 Additional Assessment was apparently never contested by the Debtor.
The Debtor filed for protection under chapter 7 of the Bankruptcy Code on June 28, 1993. Subsequently, he filed an adversary proceeding seeking a determination as to the dischargeability of his tax debts for, in relevant part, the years of 1982 through 1988 under §§ 507(a)(8) and 523(a)(1)(A) and (B). The matter was submitted to the Bankruptcy Court on stipulations of fact, memorandum of law, affidavits, and exhibits. The Bankruptcy Court determined that the Debtor properly filed his 1982-1985 tax returns by delivering them to the IRS's Portland, Oregon office, as opposed to the IRS's Ogden, Utah servicing center. It was uncontradicted that the returns were signed by the Debtor. Therefore, the Debtor's debts for taxes for 1982-1985 were not excepted from discharge under § 523(a)(1)(B)(i). The Bankruptcy Court also found that the Debtor's amended tax returns for the 1986-1988 tax years, which were filed in the IRS's servicing center in Ogden, Utah were also "returns" for purposes of § 523(a)(1)(B)(i). As a result, the Bankruptcy Court refused to deny the Debtor's discharge as to his 1986 through 1988 taxes under § 523(a)(1)(B)(i). Finally, the Bankruptcy Court determined that all of the Debtor's tax debts, with the exception of the portion of the Debtor's 1987 tax debt set in the 1993 Additional Assessment, were not priority debts under § 507(a)(8)(A)(ii) because they were assessed by the IRS more than 240 days prior to the Debtor's petition date. Therefore, the taxes were not excepted from discharge under § 523(a)(1)(A). Since the debt established in the 1993 Additional Assessment was assessed by the IRS within 240 days of the Debtor's petition date, it was held to be a priority claim under § 507(a)(8)(A)(ii), and therefore nondischargeable under § 523(a)(1)(A).
Since this matter was submitted to the Bankruptcy Court on stipulations, there are no factual disputes. The IRS contests that portion of the Bankruptcy Court's Judgment finding that the Debtor's tax debts for the tax years 1982 through 1986 and 1988 are dischargeable under § 523(a)(1)(B)(i). In addition, the IRS contends that any tax debt owed for the 1987 tax year in excess of the amount of the 1993 Additional Assessment should be nondischargeable under § 523(a)(1)(B)(i).
Section 523(a)(1) provides, in pertinent part:
11 U.S.C. § 523(a)(1)(B). Exceptions to discharge are to be narrowly construed. Bellco First Fed. Credit Union v. Kaspar (In re Kaspar), 125 F.3d 1358, 1361 (10th Cir.1997); Driggs v. Black (In re Black), 787 F.2d 503, 505 (10th Cir.1986). The Debtor must prove the filing of the returns by a preponderance of the evidence. Campbell v. United States (In re Campbell), 186 B.R. 731, 733 (Bankr. N.D.Fla.1995) (citing Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991)); see also Huber v. Massachusetts Dep't of Revenue (In re Huber), 211 B.R. 767 (Bankr.M.D.Fla.1997). The IRS argues that the Bankruptcy Court erred in determining that a portion of the Debtor's tax debt for 1987 and all of his tax debts for 1982 through 1986 and 1988 are dischargeable because the Debtor did not file returns for those tax years. As a...
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