Olson v. Comm'r of Internal Revenue, Docket No. 29991-84.

• Decision Date: 25 June 1986
• Docket Number: Docket No. 29991-84.
• Citation: 86 T.C. 1314,86 T.C. No. 77
• Parties: THEODORE OLSON AND SANDRA A. OLSON, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
• Court: U.S. Tax Court

86 T.C. 1314

86 T.C. No. 77

THEODORE OLSON AND SANDRA A. OLSON, Petitioners

v.COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 29991-84.

United States Tax Court

Filed June 25, 1986.

Ps filed a bankruptcy petition on Mar. 1, 1982. On Dec. 21, 1982, R issued a notice of deficiency. On Jan. 27, 1984, the bankruptcy court issued an order dismissing the bankruptcy case pursuant to 11 U.S.C. sec. 1112(b)(1) (1979). On Jan. 31, 1984, the bankruptcy court entered the order of dismissal on its docket. On Feb. 7, 1984, Ps filed a motion for reconsideration of the order of dismissal, which was denied on Feb. 17, 1984. On Feb. 23, 1984, Ps filed an appeal to the district court and on Feb. 27, 1984, Ps filed for a stay pending appeal of the bankruptcy court's order of dismissal. On Mar. 13, 1984, the district court denied the motion for stay and on Aug. 21, 1984, the bankruptcy court's order of dismissal was affirmed. On Aug. 22, 1984, Ps filed a petition with this Court.

HELD: 11 U.S.C. sec. 362(a)(8) provides for an automatic stay of proceedings in the Tax Court until the earliest of the time that a bankruptcy case is closed or dismissed or a discharge is granted or denied. 11 U.S.C. sec. 362(c)(2).

HELD FURTHER: Under these circumstances, the bankruptcy case was dismissed for purposes of 11 U.S.C. sec. 362(c)(2) on Jan. 31, 1984, the date on which the bankruptcy court entered its order of dismissal and, accordingly, the automatic stay was terminated. Thus, Ps had 150 days from that date to file a petition with this Court. 26 U.S.C. sec. 6213(f).

HELD FURTHER: R's motion to dismiss for lack of jurisdiction is granted since the petition was filed more than 150 days after Jan. 31, 1984. George Rabil and David Good, for the petitioners.

Linda Dettery and Thomas Meyerer, for the respondent.

FEATHERSTON, JUDGE:

This case was assigned pursuant to section 7456(d), Internal Revenue Code of 1954, as amended, and Rules 180 et seq., Tax Court Rules of Practice and Procedure, to Special Trial Judge Peter J. Panuthos for the purpose of conducting the hearing on respondent's motion to dismiss for lack of jurisdiction. After a review of the record, we agree with and adopt his opinion which is set forth below.

OPINION OF THE SPECIAL TRIAL JUDGE

PANUTHOS, SPECIAL TRIAL JUDGE:

This case is before the Court on respondent's motion to dismiss for lack of jurisdiction filed August 12, 1985. The issue before the Court is whether petitioners timely filed their petition. In order to answer that question we must determine at what point in time an order of dismissal from a bankruptcy court pursuant to 11 U.S.C. section 1112(b)(1) (1979) ¹ terminates the automatic stay provided for in section 362(a)(8) which takes effect when a case is commenced in the bankruptcy court.

Respondent, in his notice of deficiency, determined the following deficiencies in petitioners' Federal income tax:

+------------------------------------------+
                ¦    ¦           ¦Addition to tax          ¦
                +----+-----------+-------------------------¦
                ¦Year¦Deficiency ¦sec. 6653(a), I.R.C. 1954¦
                +----+-----------+-------------------------¦
                ¦1976¦$465,644.56¦$23,282.23               ¦
                +----+-----------+-------------------------¦
                ¦1977¦261,602.56 ¦13,080.13                ¦
                +----+-----------+-------------------------¦
                ¦1978¦63,837.12  ¦3,191.86                 ¦
                +------------------------------------------+
                

At the time of filing their petition, petitioners resided in Atkinson, Nebraska.

Petitioners filed a bankruptcy petition on March 1, 1982, in the United States Bankruptcy Court for the District of Nebraska (hereinafter bankruptcy court). On December 21, 1982, respondent issued the notice of deficiency. By order dated January 27, 1984, the bankruptcy court dismissed petitioners' bankruptcy case pursuant to section 1112(b)(1). ² On January 31, 1984, the bankruptcy court entered the order of dismissal on its docket. On February 7, 1984, petitioners filed a motion for reconsideration of the order of dismissal, which the bankruptcy court denied on February 17, 1984. On February 23, 1984, petitioners appealed the denial of the motion for reconsideration and the bankruptcy court's order of dismissal to the United States District Court for the District of Nebraska (hereinafter district court). On February 27, 1984, petitioners filed an emergency motion for order of stay pending appeal of the bankruptcy court's order of dismissal. On March 13, 1984, the district court denied petitioners' motion for stay pending appeal, and on August 21, 1984, it affirmed the bankruptcy court's order of dismissal. Petitioners filed their petition in this Court on August 22, 1984.

Section 362(a)(8) provides for an automatic stay of ‘the commencement or continuation of a proceeding before the United States Tax Court concerning the debtor.‘ We have previously considered the impact of section 362(a)(8) in different factual circumstances, most recently in Thompson v. Commissioner, 84 T.C. 645 (1985); see also McClamma v. Commissioner, 76 T.C. 754 (1981). ³ In Thompson we held that revocation of a bankruptcy discharge precludes a taxpayer from filing in the Tax Court because of the prohibition imposed by section 362(a)(8). We have not previously considered the question of whether the automatic stay is extended for a period during which an order of dismissal by the bankruptcy court is on appeal to the district court. ⁴

Petitioners argue that under Thompson their bankruptcy petition was not finally dismissed until the appeal was denied and, therefore, the automatic stay remained in effect until August 21, 1984 (the date on which their appeal was denied). Respondent argues that the bankruptcy court's order of dismissal terminated the automatic stay and that the time for filing a petition in the Tax Court began to run on January 27, 1984 (the date of the bankruptcy court's order). We agree with respondent's theory, but find that the operative date was January 31, 1984, the date on which the bankruptcy court's order of dismissal was entered on the docket. ⁵

Section 362(c)(2)(B) ⁶ states that the automatic stay provided for in section 362(a)(8) continues until the case is dismissed. Petitioners urge the Court to find that their case was not dismissed from the bankruptcy court until their appeal was denied by the district court. We are satisfied that Congress intended dismissal for purposes of section 362(c)(2)(B) to mean dismissal by the bankruptcy court and not appellate action by a district court. ⁷ We have examined the legislative history of section 362(c)(2)(B) and conclude that nothing in the history indicates that we should construe the word ‘dismissal‘ in the manner suggested by petitioners. ⁸

The result we reach here is consistent with Congress' intent regarding the automatic stay and dismissal. The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws; it is designed to provide a debtor with a breathing spell from his creditors. S. Rept. No. 95-989, 340 (1978), 5 U.S. Cong. and Admin. News 6296 (1978). This breathing spell is secured by means of the automatic stay; however, a breathing spell by its very nature is impermanent. Thus, it terminates when the stay does, in some instances, as here, upon a dismissal by the bankruptcy court.

The bankruptcy rules reflect this basic rule, that the automatic stay expires upon dismissal of a case, by requiring that a party obtain a stay pending appeal of a judgment of the bankruptcy court. Rule 8005, R.B.P. Absent any order pursuant to Rule 8005, R.B.P., staying the dismissal, the automatic stay terminates upon dismissal. In re Weathersfield Farms, Inc., 34 B.R. 435, 439 (Bankr. D. Vt. 1983); see also In re De Jesus Saez, 721 F.2d 848 (lst Cir. 1983); In re Harry Bluford, 40 B.R. 640 (Bankr. W.D. Mo. 1984). ⁹

Section 6213(f), ¹⁰ I.R.C. 1954, as amended, provides that the running of the time for filing a petition in the Tax Court shall be suspended for the period during which the debtor is prohibited from filing a petition in this Court and for 60 days thereafter. Thompson v. Commissioner, 84 T.C. at 648; McClamma v. Commissioner, 76 T.C. at 758. Because the notice of deficiency was issued on December 21, 1982, during the pendency of the bankruptcy proceeding, petitioners had 150 days from January 31, 1984, to file their petition in the Tax Court. They filed in this Court on August 22, 1984, which was 204 days after the dismissal of their bankruptcy case. Since petitioners failed to file a timely petition, we have no jurisdiction to review the Commissioner's deficiency determinations. See Thompson v. Commissioner, supra; McClamma v. Commissioner, supra. Accordingly, respondent's motion to dismiss for lack of jurisdiction will be granted. ¹¹

An appropriate order will be entered.

1 All section references are to Title II of the United States Code unless otherwise specified.

2 Sec. 1112(b)(1) provides in pertinent part:»T†he court * * * may dismiss a case under this chapter, * * * for cause, including—(1) continuing loss to or diminution of the estate and absence of a reasonable likelihood of rehabilitation.

3 See also Ever Clean Services, Inc. v. Commissioner, T.C. Memo. 1982-726.

4 We do not have the question before us of whether the automatic stay remains in effect during the pendency of a motion for reconsideration of an order of dismissal or during the pendency of a motion for stay pending appeal. The facts as presented here are that the 150-day period would have run using either date (Feb. 17, 1984 or Mar. 13, 1984).

5 The bankruptcy court dismissed petitioners' case under sec. 1112(b)(1). Its order dismissing the case was dated Jan. 27, 1984, and entered on its docket Jan. 31, 1984. An order of dismissal under sec. 1112(b)(1) is an appealable order. See, e.g., In re Garland Corp., 6 B.R. 456 (Bankr. lst Cir. 1980); In re Pinellas Motel Partnership, 5 B.R. 269 (Bankr. M.D. Fla. 1980). The order, therefore...