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Archive for Gregory Mitchell

Taxes and Bankruptcy: Taxes In Bankruptcy Case

Greg Mitchell - Taxes And Bankruptcy

In re Minor; 127 AFTR 2d 2021-XXXX (DC CA); Case No. 2:20-cv-03626 (DC, C.D. CA)

This case involves taxes in a bankruptcy case that were priority taxes under the Bankruptcy Code.

The Debtor in this case filed for Chapter 7 bankruptcy in May, 2013 and received a discharge in May, 2015.  In March, 2018, the IRS filed an amended proof of claim in the bankruptcy case for almost $26 million for unpaid federal income taxes owed by Minor for tax years 2007, 2008, 2009, and 2011 (the “IRS Claim”).  The IRS Claim consisted of a secured claim of $24,857,210.48, a priority claim of $997,869.07, and an unsecured claim of $61,398.90.

The California Franchise Tax Board (“FTB”) also filed its own proof of claim, the details of which were not relevant for purposes of this case.  What was relevant was that the bankruptcy trustee did not have enough funds to pay both the IRS and the FTB claims in full.  Therefore, the bankruptcy trustee (“Trustee”), the IRS, and the FTB entered into a stipulation regarding the division of available funds (the “Stipulation”).

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Bankruptcy Exemptions, Pension Plans, And Section 409A

Bankruptcy Exemptions, Pension Plans, And Section 409A

This post covers the recent case of In re O’Malley, 127 AFTR 2d 2021-XXXX (DC IL) (March 2, 2021).

In this case, the Debtor failed to disclose a retirement plan in his initial bankruptcy schedules in a case originally filed in March, 2013.  At the creditor meeting, the Debtor disclosed the existence of an interest in a MetLife defined benefit pension plan, and committed to amending his schedules to include that interest.  Subsequently, the Debtor did in fact amend his schedules to list a single “Met Life Defined Benefit Pension Plan” of “Unknown” value and proceeded to claim 100% of its value as exempt from the estate under an Illinois law that protects pension benefits.  Following the conclusion of the creditor meeting, neither the Trustee nor any creditor objected to the exemption claimed by Mr. O’Malley for the pension plan disclosed in the amended schedules.

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James And Simona Quezada v. Internal Revenue Service – The Fifth Circuit And The Discharge Of Taxes In Bankruptcy

James And Simona Quezada v. Internal Revenue Service – The Fifth Circuit And The Discharge of Taxes in Bankruptcy

The dischargeability of and the ability to collect taxes by the IRS in a consumer bankruptcy case often turn on the issue of whether and when the taxpayer filed the relevant returns, thereby determining when the statute of limitations on assessment began to run.  In this case, the IRS assessed the taxpayer, James Quezada, in 2014 for tax deficiencies arising for tax years 2005-2008.  Quezada filed for bankruptcy in 2016.  The IRS filed a claim for the alleged 2005-2008 tax deficiency.  Over the taxpayer’s objection, the Bankruptcy Court held that the limitations period never began to run because Quezada never filed “the return,” and the District Court affirmed.  As a result, the taxes were deemed not dischargeable, and the IRS’s claim was upheld.

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