Some  Bankruptcy Decisions Involving Income Tax

 

      In the case of In re Talbot, 124 F 3d 1201 (10th Cir. Utah 1997), the IRS was ordered to return money they collected when they sold the debtor's home after a Chapter 13 plan was confirmed.  In the case of In re Berteld, 213 B.R. 173 (Bkrtcy.M.D.Fla. 1997, the court ruled that the debtor had committed fraud because he filed an exempt W-4 and failed to file tax returns.  The court ruled in the case of In re Brabham, 212 B.R. 999 (Bkrtcy.M.D.Ala. 1997, that federal tax penalties were not discharged in a prior Chapter 7 case because the events that triggered the penalties were within three years of the filing of the bankruptcy. 

 

      The court ruled that proof that the IRS received the return fulfills the requirement of filing for Bankruptcy Code purposes.  In re Whelan, 213 B.R. 310 (Bkrtcy E.D.La 1997).  In the case of In re Busch, 213 B.R. 390 (Bkrtcy.M.D.Fla., 1997), the Court ruled that typical tax protestor arguments that the IRC does not grant valid authority to assess and collect taxes on income are frivolous. 

 

      The IRS was held to be liable for the damages, including attorney's fees, arising from an intentional violation of the automatic stay (motion to hold IRS in contempt for violation of stay - IRS refused to return money levied upon postpetition).  In re Milto, 210 B. R. 689 (Bkrtcy.D.Md. 1997). 

 

      The Court took the position that a SFR (Substitute for a return) followed by a signed voluntary payment agreement and a 433-D constitutes a "return" for purposes of the two-year rule under Section 523.  In re Hatton, 216 B.R. 278 (9th Cir. BAP 1997).  In a non-tax case, the court ruled that because a debtor's single participant profit sharing plan was not ERISA qualified, its anti-alienation provision was not enforceable and debtor's interest in plan was estate property. In re Watson, 214 B.R. 597 (9th Cir. BAP 1997).  Income tax claims are nondischargeable in a Chapter 13 because the due date of the tax returns fell within three years of filing the bankruptcy.  In re Moore, 214 B.R. 887 Bkrtcy.E.D.Ark. 1997).  Taxes are nondischargeable in a Chapter 7 because the debtor did not sign tax returns.  The substitute tax returns prepared by the IRS do not count as tax returns for purposes of section 523. In re Gentry, 214 B.R. 849 (Bkrtcy.M.D.Tenn. 1997). 

 

      The Court ruled that the Bankruptcy Court improperly relied on fact findings by the tax court that the debtor had engaged in tax avoidance.  Tax avoidance is not the same thing as tax evasion for purposes of Section 523(a)(1)(C).  In re Kramer, 215 B.R. 87 (S.D. Fla. 1997).

 

      The IRS issued a prepetition levy on the debtor's bank account and the bank sent the levied funds to the IRS postpetition.  The IRS refused to turn over the money. The court ruled that the IRS did not violate the automatic stay and although the funds were the property of the estate the trustee was not entitled to the funds without adequate protection as to its lien rights, In re Quality Health Care, 215 B.R. 543 (Bkrtcy.N.D. Ind. 1997). The normal procedure to determine the amount of tax debt is for the IRS to file a motion under 11 USC 505 for the bankruptcy court to make such a determination. In re Taylor, 132 F.3d 256 (5th Cir. 1998)  (Chapter 11).

 

      The claim is allowed once the proof of a tax debt is filed unless the debtor or another party in interest files an objection to the proof of claim. In re Taylor, 132 F3d 256 (5^th Cir. 1998).  A debtor can file a claim on behalf of a taxing entity and then file an objection to the claim.  In re Taylor, 132 F.3d 256 (5^th Cir. 1998).

 

      Taxes were not dischargeable when the debtor filed a tax return that contained no information except a "zero" on the line for the taxes owed.  A frivolous return is not a return within the meaning of the Bankruptcy Code. In re LaRue 215 B.R. 766 (Bkrtcy.D.Ariz. 1997).

 

OUR GOVERNMENT'S DESIRE TO PROTECT US FROM THE EVILS OF

DRUGS IS DESTROYING

THE CONSTITUTION

 

           Drug cases are flooding the federal courts and the  punishments are continuing to escalate.  Federal judges  do not have a lot of say on sentencing.  Even possession of marijuana without intent to sell carries a mandatory minimum.  Now prosecutors can appeal if they don't like the sentence.  There is no federal parole.  If you are convicted, you go to camp.  Defense attorneys now are simply guides to lead the defendant to the most palatable sentence.  The government gets all the time it wants to prepare a case and the defendant gets only seventy days.  The government can also ruin the defense by confiscating in advance any money that the defendant would use to pay a lawyer.  Of course, in tax and drug cases, there is very little any attorney can do anyway.

 

           Meanwhile the Supreme Court is steadily destroying the Fourth, Fifth,  Sixth, Eighth and Fourteenth  Amendments to the Constitution.  The Court has let  police obtain search warrants on the strength of  anonymous tips (Fourth and Sixth Amendments).  The  police can now search luggage, trash cans, car  interiors, bus passengers, fenced private property and  barns without search warrants. (Fourth). Drug offenders can be held without bail (Eighth).  Property can be confiscated before a suspect is charged, let alone convicted. (Fifth). Prosecutors can imprison people twice--at the state and federal levels--for the  same crime. (Fifth).Police can fly as low as 400 feet over houses in their search for marijuana plants  (Fourth).  Defense attorney's legal fees can be seized in drug cases. (Sixth) Mandatory urine tests are allowed for federal employees (Fourth).  In a Michigan case, the Supreme Court let stand a sentence of  mandatory life without parole for simple drug  possession.

 

           The will of the  American people is geared up for more enforcement and less Constitution.  Our rights are not being taken away.  They are being given away.  The American People are giving away their Constitutional Rights out of fear, ignorance and laziness.  Do you think it is any wonder that juries continue to convict patriots for not voluntarily waiving their Constitutional  Rights?

 

          And if things are not bad enough now: they are sure to get a lot worse before they get better.