DocketNumber: No. 21419-03L
Citation Numbers: 2006 T.C. Memo. 38, 91 T.C.M. 852, 2006 Tax Ct. Memo LEXIS 39
Judges: \"Wells, Thomas B.\"
Filed Date: 3/9/2006
Status: Non-Precedential
Modified Date: 4/18/2021
MEMORANDUM OPINION
WELLS, Judge: Petitioner seeks review, pursuant to
Background
Some of the facts and certain exhibits have been stipulated. The parties' stipulations of fact are incorporated in this opinion by reference and are found as facts in the instant case. At the time he filed his petition, petitioner resided in Remlap, Alabama.
Petitioner*40 filed Forms 1040, U.S. Individual Income Tax Return, for the taxable years 1988, 1989, 1990, 1991, 1993, and 1995 but failed to pay the balances reported as due. Petitioner did not file Forms 1040 for the taxable years 1996 and 1997. Instead, petitioner filed IRS Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, Etc. Along with Form 4852, petitioner filed an "Asseveration of Claimed Gross Income", (asseveration) in which he claimed, among other things, as follows:
The Asseveror hereby further states that, despite the claims of
Long Lewis Ford [his employer] on the copy of the W-2's or
1099's, attached to this Asseveration, he did not have any gross
income, as he did not have any items of gross income (26 CFR
Secretary (
income', pursuant to the rules promulgated by the Secretary.
* * * * * * *
*41 Furthermore, since the remuneration paid to the Asseveror by
Long Lewis Ford on the Copy of the W-2's or 1099's, attached to
this Asseveration, is not from a taxable source listed in
8(f)(1), nor listed in
paid to the Asseveror is excluded from the law, and thus
excluded from the definition of "gross income". This definition
of gross income from a source, related to U.S. Citizens,
directly leads to
with U.S. Citizens living abroad.
Petitioner states in his asseveration that, because he was not living abroad, he did not have "wages", and the remuneration he received from his employer was therefore exempt.
In a letter attached to his asseveration, petitioner further stated as follows:
As you have probably already noted, the instructions on the 4852
Form states plainly that it is to be attached to the Form 1040,
yet these Forms are presented without the 1040. I am concerned
and almost certain that the IRS will not take these 4852
documents into consideration should I file the 1040 Form*42 with
corresponding numbers, which would be zero.
Petitioner concluded the letter stating that, because he did not have any gross income, he could not have any taxable income, and therefore he was not required to file a Form 1040.
Respondent sent petitioner separate notices of deficiency for each taxable year in issue, but petitioner failed to petition this Court. 2 Respondent timely assessed petitioner for the tax, additions to tax, penalties, and interest for the years in issue.
On November 28, 2002, respondent sent petitioner a Letter 1058, Final Notice of Intent to Levy and Notice of Your Right to a Hearing. Petitioner timely filed Form 12153, Request for a Collection Due Process Hearing, on December 19, 2002. Respondent's Appeals Officer Gayla L. Owens conducted petitioner's hearing on November 12, 2003. Petitioner raised only frivolous tax protester type arguments at the hearing, arguing that he did not have gross income*43 as defined by
On November 19, 2003, respondent sent petitioner a Notice of Determination Concerning Collection Action(s) Under
On April 23, 2004, petitioner*44 filed a petition under chapter 7 of
At trial, petitioner's only argument, raised for the first time, was that the bankruptcy court's July 27, 2004, order*45 discharged his tax liabilities.
Discussion
The issue we must decide is whether the bankruptcy court's July 27, 2004, order forecloses respondent from collecting petitioner's tax liabilities for the 1988, 1989, 1990, 1991, 1993, 1995, 1996, and 1997 taxable years. Petitioner did not raise the issue of his bankruptcy discharge during the
Before we address the issue of the bankruptcy discharge, we briefly address petitioner's position at the Appeals hearing, in his petition to this Court, and throughout the administrative process before the Internal Revenue Service.
Where the validity of the underlying tax liability is properly in issue, the Court will review the matter de novo. Where the validity of the underlying tax is not properly in issue, however, the Court will review the Commissioner's administrative determination for abuse of discretion.
Petitioner did not dispute at his Appeals hearing that he received the notices of deficiency. Petitioner argued, during the Appeals hearing and throughout the administrative process with the IRS, that he did not have taxable income under
Petitioner contends, for the first time in his brief, that his tax liabilities for the years in issue have been discharged under
The issues addressed in
state that if the tax was "assessed within 240 days, plus
any time plus 30 days [sic] during which an offer in compromise
with respect to such tax that was made within the 240 days after
such assessment was pending, before the date of the filing of
the petition" the taxes in question are not dischargeable.
In the instant case, NONE of the things addressed*49 in the above
referenced code sections apply. The taxes were, by the IRS's own
admission, assessed more than 240 days prior to the bankruptcy
petition being filed and there was no recent offer in compromise
to take into consideration.
Further,
when returns, if required, are filed. Those sections clearly
state that an income tax debt is dischargeable under [11] U.S.C.
extensions, more than 3 years prior to the bankruptcy filing
date. * * * Obviously, since the latest year at issue is 1997
the 3 year time limit has run.
Petitioner also contends that respondent has no claim because respondent failed to attend the creditors' meeting on May 27, 2004, to claim the tax debt was not discharged.
Respondent contends that, under
We do not need to decide whether
This Court has*52 jurisdiction in a levy proceeding instituted under
Title 11
The record in the instant case contains no evidence that the bankruptcy court addressed the issue of whether petitioner's tax liabilities were dischargeable. The bankruptcy court's order merely states: "The debtor is granted a discharge under
In Washington and Swanson we decided that the bankruptcy court had not addressed whether the taxpayers' tax debts were discharged because the records in both cases lacked any evidence to the contrary. The bankruptcy court orders in both Washington and Swanson released the taxpayers from all "dischargeable debts." See
Accordingly, based upon our holdings in
III.
As noted above, petitioner contends that his tax liabilities for the years in issue were discharged because they were not filed within the time prescribed under
(8) Eighth, allowed unsecured claims of governmental units, only
to the extent that such claims are for --
(A) a tax on or measured by income or gross receipts --
(i) for a taxable year ending on or before the date of
the filing of the petition for which a return, if
required, is last due, including extensions, after
three years before the date of the filing of the
petition;
(ii) assessed within 240 days, plus any time plus 30
days during which*56 an offer in compromise with respect
to such tax that was made within 240 days after such
assessment was pending, before the date of filing the
petition; or
(iii) other than a tax of a kind specified under
not assessed before, but assessable, under applicable
law or by agreement, after, the commencement of the
case;
Thus, according to petitioner, respondent's claims for petitioner's income taxes are valid only if a tax return was due within 3 years of the filing of the petition with the bankruptcy court, or the tax was assessed within 240 days before the filing of the petition with the bankruptcy court. We disagree. Title
(a) A discharge under
1328(b) of this title does not discharge an individual
debtor from any debt --
(1) for a tax or a customs duty --
(A) of the*57 kind and for the periods specified in
whether or not a claim for such tax was filed or
allowed;
(B) with respect to which a return, if required --
(i) was not filed; or
(ii) was filed after the date on which such
return was last due, under applicable law or
under any extension, and after two years before
the date of the filing of the petition; or
(C) with respect to which the debtor made a fraudulent
return or willfully attempted in any manner to evade
or defeat such tax; [Emphasis added.]
Accordingly, an individual debtor is not discharged under
Petitioner also fails to appreciate the effect of lien under
If any person liable to pay any tax neglects or refuses to pay
the same after demand, the amount (including any interest,
additional amount, addition to tax, or assessable penalty,
together with any costs that may accrue in addition thereto)
shall be a lien in favor of the United States upon all property
and rights to property, whether real or personal, belonging to
such person.
The lien arises at assessment and continues until the liability is satisfied or becomes unenforceable because of lapse of time.
IV. Dischargeability Under
A Chapter 7 debtor generally is discharged from all debts that arose before the filing of the bankruptcy petition under
The Bankruptcy Code does not define the term "return". In defining return for purposes of
Petitioner filed Forms 1040, for the taxable years 1988, 1989, 1990, 1991, 1993, and 1995 but failed to pay the balances due. Petitioner did not file Forms 1040 for the taxable years 1996 and 1997. Instead, for taxable years 1996 and 1997, petitioner filed IRS Form 4852, Substitute for Form W-2, or Form 1099-R, and his asseveration denying that he earned any wages. 8 At trial, petitioner argued that, although he did not file a Form 1040, he did file IRS Form 4852, which he claimed was apparently good enough for the IRS to make its assessment.
*61 Petitioner signed the Form 4852 under penalty of perjury. However, that document does not satisfy the other prongs of the
The Form 4852 also does not represent an honest and reasonable attempt to satisfy the tax laws,
"In tax protester cases, it is obvious that there is no 'honest
and genuine' attempt to meet the requirements of the code. In
our self-reporting tax system the government should not be
forced to accept as a return a document which plainly is not
intended to give the required information." [
(quoting
Cir. 1980)).]
Accordingly, we hold that petitioner did not file returns for the 1996 and 1997 taxable years, and, therefore, his tax liabilities for those two years are excepted from discharge under
V.
We need not decide whether the bankruptcy court discharged petitioner from personal liability for his tax liabilities for 1988, 1989, 1990, 1991, 1993, *63 and 1995. 9 Even if we were to assume arguendo that those liabilities were discharged in personam, any property that belonged to petitioner when he filed his bankruptcy petition is still encumbered in rem by a Federal tax lien and remains subject to levy. The U.S. Government obtains a lien against all property and rights to property, whether real or personal, if a person liable for any tax neglects or refuses to pay such tax after demand has been made.
*64 Federal tax liens of which notice has been filed are not extinguished by personal discharge in bankruptcy.
The record in the instant case shows that, before petitioner commenced his case in bankruptcy, respondent properly assessed and demanded payment of the tax liabilities owed for the 1988, 1989, 1990, 1991, 1993, and 1995 taxable years. Petitioner has presented no evidence that the Federal tax liens arising from those liabilities were defective. Petitioner simply insists that*65 his tax debts were discharged by the bankruptcy court's July 27, 2004, order. However, when petitioner filed for bankruptcy, there were valid Federal tax liens on his property.
If any person liable to pay any tax neglects or refuses to pay
the same * * *, it shall be lawful for the Secretary to collect
such tax * * * by levy upon all property and rights to
property(except such property as is exempt under
belonging to such person or on which there is a lien provided in
this chapter for the payment of such tax. * * *
Petitioner has neither alleged nor presented any evidence that any of the property to which the Federal tax lien attached or upon which respondent intends to levy is exempt under
Petitioner contends, in his brief, that respondent does not have a claim because respondent failed to attend the creditors' meeting on May 27, 2004, to object to petitioner's discharge. Petitioner's argument has*67 no merit. Because the tax debts for 1996 and 1997 in the instant case are of the type specified in
We have considered all of petitioner's contentions. To the extent not addressed herein, those contentions are without merit or unnecessary to reach.
VII.
The record in the instant case shows that respondent warned petitioner in November 2003, and*68 again in the notice of determination, that this Court could impose a penalty under
Petitioner's 1996 and 1997 tax returns were nothing but vehicles to assert his frivolous
Petitioner was well aware that respondent intended to collect petitioner's tax liabilities long before he filed his petition with the bankruptcy court on April 23, 2004. Petitioner had been receiving correspondence from respondent for many years regarding his growing tax liabilities and was sent respondent's Final Notice of*69 Intent to Levy on November 28, 2002, approximately 1 year and 5 months before petitioner filed his petition with the bankruptcy court. Between November 28, 2002, and his Appeals hearing almost a year later on November 12, 2003, petitioner repeatedly raised his frivolous
On the basis of the record in the instant case, we are convinced that petitioner instituted proceedings with this Court to delay collection, repeatedly advanced*70 his frivolous
We hold that respondent may proceed with the proposed levy to collect the tax liabilities for the years in issue. To reflect the foregoing,
An appropriate decision will be entered.
1. Unless otherwise indicated, all section references are to the Internal Revenue Code, as amended.↩
2. Petitioner does not dispute that he received the notices of deficiency.↩
3. Schedule F listed: "Ms. KenyaBufford, Insolvency Specialist, IRS/Special Procedure Function, 801 Tom Martin Drive, Room 126, Birmingham, AL 35211". Schedule F did not list the total tax owed.↩
4. In two letters to respondent dated July 31 and Sept. 16, 2002, petitioner claims that he is not a tax protester and that he has never made a ridiculous claim regarding the law. Petitioner informed respondent that he was a member of N.I.T.E. National Institute for Taxation Education) and a follower of Thurston Paul Bell, a well-known advocate of the frivolous
We note that Thurston Paul Bell was enjoined from promoting his frivolous
5. While we do not address petitioner's frivolous
6. Petitioner filed tax returns for these years but failed to pay the balances due.↩
7. Respondent contends that, since the record in the instant case does not contain any indication that the
8. Petitioner informed respondent's Appeals Officer that his speech included in the Form 4852 was protected under the
9. Although not necessary to our decision in the instant case, we take notice that bankruptcy courts that have faced the issue have held that frivolous tax protester behavior may constitute a willful attempt in any manner to evade or defeat tax under
We also take notice that based on petitioner's long history of not paying his taxes, his frivolous arguments, and his creation of roadblocks to prevent collection of his tax liabilities, a court could conclude that petitioner did not file his bankruptcy petition in good faith. Such bad faith filing by tax protesters is an attempted abuse of the bankruptcy process which frequently results in the dismissal of the petition by the bankruptcy court. See, e.g.,
James T. Eicher v. United States , 774 F.2d 27 ( 1985 )
Whitehouse v. LaRoche , 277 F.3d 568 ( 2002 )
In Re Douglas W. Bergstrom, Debtor. Douglas W. Bergstrom v. ... , 949 F.2d 341 ( 1991 )
Sharon D. Welch v. United States , 750 F.2d 1101 ( 1985 )
Kahn, Emily v. United States , 753 F.2d 1208 ( 1985 )
United States v. Thurston Paul Bell , 414 F.3d 474 ( 2005 )
Glenn Crain v. Commissioner of Internal Revenue , 737 F.2d 1417 ( 1984 )
Elizabeth S. McKee v. United States of America, Deborah ... , 781 F.2d 1043 ( 1986 )
E.H. Mosher, Sr. v. Internal Revenue Service , 775 F.2d 1292 ( 1985 )
In Re William C. Hindenlang, Debtor. United States of ... , 164 F.3d 1029 ( 1999 )
Chase Automotive Finance, Inc. v. Kinion (In Re Kinion) , 207 F.3d 751 ( 2000 )
United States v. John Paul Malinowski , 472 F.2d 850 ( 1973 )
Robert D. Beard v. Commissioner of Internal Revenue , 793 F.2d 139 ( 1986 )
Wallace T. Collett and Carrie H. Collett v. United States , 781 F.2d 53 ( 1985 )
Lorin G. Sloan v. Commissioner of Internal Revenue , 53 F.3d 799 ( 1995 )
Daniel R. Hudson v. United States , 766 F.2d 1288 ( 1985 )
Nandor Hettig v. United States , 845 F.2d 794 ( 1988 )
United States v. David N. Moore , 627 F.2d 830 ( 1980 )
Martin S. Bradley v. United States , 817 F.2d 1400 ( 1987 )