In re Washburn
| Decision Date | 16 July 2002 |
| Docket Number | Adversary No. 01-712.,Bankruptcy No. 01-15534-9P7. |
| Citation | 290 B.R. 162 |
| Parties | In re Barbara J. WASHBURN, Debtor. Barbara J. Washburn, Plaintiff, v. United States of America, Defendant. |
| Court | U.S. Bankruptcy Court — Middle District of Florida |
Jeffrey W. Leasure, Leasure & Heidkamp, P.A., Fort Myers, FL, for debtor.
Diane L. Jensen, Fort Myers, FL, Chapter 7 Trustee.
Philip Doyle, U.S. Department of Justice, Washington, DC, for defendant.
FINDINGS OF FACT, CONCLUSIONS OF LAW AND MEMORANDUM OPINION
The matter under consideration in this Chapter 7 Case, is "Motion by United States for Summary Judgment," filed by the United States of America (Government), in the above-captioned adversary proceeding. The Complaint, which is filed by Barbara J. Washburn (Debtor), seeks a determination by this Court that the tax obligations for the years of 1992, 1993, 1994, 1995, 1996 and 1997 are not within the exception of discharge set forth in 11 U.S.C. § 523(a)(1) because the returns (1) were due more than three years prior to the filing of the bankruptcy case; (2) were actually filed more than two years before the date of the filing of the Petition; and (3) were not assessed within the 240 days prior to the commencement of this case.
The Government, in its Motion, contends that there are no genuine issues of material facts, and based on the same, the liabilities of the Debtor for the tax years in question, are within the exception 11 U.S.C. § 523(a)(1)(B)(i).
The facts relevant to the resolution of the issue are indeed without dispute and can be summarized as follows. The Debtor, who is a widow, failed to file the required 1040 tax returns for the years indicated above. At all times relevant, the Debtor was a licensed real estate broker and worked as such since 1971. During the 1970's, the Debtor and her husband owned and operated a real estate firm in Michigan (Exh. 10, p. 13). Because of the husband's first major heart attack in 1979, they abandoned the Michigan brokerage firm and moved to Florida in 1981.
In Florida, each accepted positions as real estate sales persons and worked for other real estate companies. (Exh. 10, p. 10-14). In 1992, the Debtor's husband retired and received only social security retirement income, but the Debtor continued to be employed as a real estate broker and basically earned all of the income for the couple in the year 1992. Prior to 1992, the Debtor and her husband filed joint federal income tax returns. In 1992, the couple moved to 7121-614 Golden Eagle Court, Ft. Myers, Florida. It was this address that they filed a joint 1991 income tax return.
In January 1993, the Debtor's husband died of a heart attack. After his death, the Debtor learned that a $40,000 life insurance policy, which she had counted on, did not exist. Moreover, she learned that they were indebted in excess of $40,000 in credit cards and she was not previously aware of this obligation. When the time came to prepare and file the 1992 federal income tax return in April of 1993, the Debtor approached an accountant for the purpose of discussing the filing of the return but she had difficulty in locating receipts and other relevant documents necessary for filing the tax return. No return was filed for the year 1992.
In September 1993, the Debtor moved from the Golden Eagle Court home. It is without dispute that the Debtor did not filed the required tax returns for the years 1994, 1995, 1996, and 1997. And, it is also without dispute that the Debtor did not notify the IRS of her change of address. According to her testimony given at her deposition, the Debtor stated that she did not file the 1992 return because she did not know how to do it and did not seek assistant of an accountant because she did not want to paint her husband in a bad light. It is also without dispute that in 1993, 1994, and 1995, she had sole control of her tax records, that she saved all records of her deductibles, notwithstanding, she did not file the tax returns because she was embarrassed of the situation she had created herself.
In 1995, the Debtor made a determined effort to pay off her creditors other than the Government. In fact, she managed to pay off a substantial amount on her credit card obligations in an amount of between $15,000 and $20,000. The Debtor made no voluntary payments at all towards her federal income tax liabilities. Between the years 1992 and 1995, there was no withholding payments or estimated payments made by the Debtor. In the year 1999 and 2000, the Debtor conditionally tendered to the Government the sum of $500, in connection with separate offers to compromise her unpaid income tax liabilities. The Debtor never contacted the IRS during the years 1993 and 1998. And, the IRS could not reach her since she had vacated her previous residence and moved to an address unknown.
The IRS repeatedly sent notices to the old address requesting that she file her returns. In July of 1994, September of 1994, October of 1994, and again November of 1994, the IRS sent delinquency notices to the Debtor. The IRS ultimately classified her as a NON-FILER and the IRS prepared an SFR or substitute for return (SFR). In 1997, the IRS issued a notice of deficiency, which was sent by certified mail to the Debtor's last known address for each of the years 1992, 1993, 1994, and 1995. On May 11, 1998, the IRS assessed income taxes against the Debtor the years of 1992, 1993, 1994, and 1995, on the basis of the SFR prepared by the service and made a formal notice and demand for payment.
In November 1998, the IRS served on the employer of the Debtor a Notice of Levy to collect her unpaid income tax liabilities for the years 1992 through 1995, in the amount of $131,453.48. Upon receipt of the Notice of Levy, the Debtor engaged the services of an accountant, went through her tax records, located her records concerning the year 1992 and with the help of the accountant prepared a 1040 for the years of 1992 up to and including 1997, and filed the same with the IRS.
Each of the forms (the 1040s) filed by the Debtor in 1998 for these years reported a lesser amount of tax than the IRS previously assessed based on the SFR. The IRS accepted the reduced amount and abated the payment of some of the taxes. The assessed balance owed by the Debtor for 1992, 1993, 1994 and 1995, crediting the abated amounts and exclusive of interest accrued for the dates of assessment are as follows:
Year Assessed Balance Due
1992 $15,608.69
1993 $19,567.42
1994 $28,565.32
total: $65,098.77
In due course, the Debtor filed an Affidavit in opposition to the Government's Motion. The Debtor, in her Affidavit, contends that prior to her husband's death, her husband was responsible for household expenses including for the preparation and filing of the income tax returns. In her Affidavit, she states that in September of 1993, she moved from the residence located at 7121-614 Golden Eagle Court to 14887 West Point Drive, Ft. Myers, Florida. She also states that she filed a change of address form with the United States Post Office. Upon learning of the levy, the Debtor contacted Joanne C. Holt, CPA, who in turn, contacted an agent of the IRS. It is the Debtor's contention that the IRS agent told the CPA that she would have 10 days to file all delinquent tax returns. The Debtor contends that in reliance of this extension by the agent of the IRS, she retained Ms. Holt, who prepared the returns for the years in question, which were mailed to the IRS, Team C, at 400 West Bay Street, Suite 35087, Jacksonville, Florida.
In 1998, after the IRS imposed a levy, the Debtor made an Offer of Compromise and tendered $500, which was rejected by the IRS. Thereafter, the Debtor made an additional offer to settle her tax liability on May 24, 1999, for $14,000, which was rejected in August of 2000 by the IRS. Thereafter, she made an offer on November 7, 2000 for $3,600, which was also rejected in May 2001.
In the year 1992, the Debtor had gross income of $47,000 and an adjusted gross income of $31,000. In the year 1993, the Debtor had gross income of $64,000 and an adjusted gross income of $40,000. She also had gross receipts of $95,000, and adjusted income of $46,000. In 1995, the Debtor had $35,000 gross receipts.
As noted, the Debtor paid all of her creditors in full other than the IRS during the relevant time period. The Debtor is an intelligent and very knowledgeable person and well knew that she had a legal obligation of filing an income tax return for the years in question. The only defense that she was depressed because of the loss of her husband is not an acceptable defense that she failed to file the tax returns. Basically, these are the controlling facts of the ultimate issue which is whether the admitted liabilities of the Debtor for unpaid taxes is within the exception of Section 523(a)(1)(B)(i) of the Code and therefore not protected by the general bankruptcy discharge.
In many respects, the fact pattern in the present...
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