《楊清泉律師專欄》INTENTIONAL EVASION OF TAX PAYMENT MAY NEGATE … (PART I)
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INTENTIONAL EVASION OF TAX PAYMENT MAY NEGATE BK DISCHARGE OF TAXES
中文版
Sections 507 and 523 of the bankruptcy code states that income taxes are discharged in bankruptcy provided they are at least 3 years old, that the assessment of tax due has been made at least 240 days before bankruptcy filing, and no fraud was involved. What if you owe $500,000 of income taxes for 1999, 2003, and 2005 and you file for Chapter 7 bankruptcy today, would you be able to wipe out the half a million of taxes you owed to the IRS? Yes, provided all required conditions were present. But what if the IRS objects to the discharge by alleging that you intentionally evaded payment of income taxes by filing tax returns without any intention of paying taxes due? Is the IRS correct? What do you think?
While it is true that intentional evasion of tax payment may negate the discharge of taxes in bankruptcy, it is not enough that the IRS makes that allegation; they must prove it by a preponderance of evidence in an adversarial proceeding in the bankruptcy case. Thus, a trial must be had, and the IRS must win at trial. If the IRS loses at trial, the taxes are discharged. Can you discharge $1.0 million of taxes? Sure. I had a client who owed the IRS $1.5 million and the entire amount was discharged in bankruptcy.
In Re United States v. Storey, Dr. Storey filed income tax returns for 1994 through 1997. She never paid any of the taxes she owed on the returns. “Bad, bad doctor”, the IRS said. She filed for Chapter 7 relief in March 2002 and eventually received a discharge without the court making a specific determination as to the dischargeability of the unpaid taxes. In March 2007, the United States sued the doctor to reduce to judgment her income tax liabilities and to foreclose on its tax liens. The doctor responded that her tax obligations were discharged. The United States replied that her taxes were not discharged because she had willfully attempted to evade or defeat their payment.
The district court granted summary judgment for the government, finding that the doctor’s pattern of filing income tax returns and not paying her taxes was evidence of a willful attempt to defeat the tax. The doctor appealed. The 6th Circuit said that, “The government must prove that the debtor 1) had a duty to pay taxes, 2) knew she had a duty, and 3) voluntarily and intentionally violated that duty.”
《楊清泉律師專欄》INTENTIONAL EVASION OF TAX PAYMENT MAY NEGATE BK DISCHARGE OF TAXES(PART II)
中文版
Sections 507 and 523 of the bankruptcy code states that income taxes are discharged in bankruptcy provided they are at least 3 years old, that the assessment of tax due has been made at least 240 days before bankruptcy filing, and no fraud was involved. What if you owe $500,000 of income taxes for 1999, 2003, and 2005 and you file for Chapter 7 bankruptcy today, would you be able to wipe out the half a million of taxes you owed to the IRS? Yes, provided all required conditions were present. But what if the IRS objects to the discharge by alleging that you intentionally evaded payment of income taxes by filing tax returns without any intention of paying taxes due? Is the IRS correct? What do you think?
While it is true that intentional evasion of tax payment may negate the discharge of taxes in bankruptcy, it is not enough that the IRS makes that allegation; they must prove it by a preponderance of evidence in an adversarial proceeding in the bankruptcy case. Thus, a trial must be had, and the IRS must win at trial. If the IRS loses at trial, the taxes are discharged. Can you discharge $1.0 million of taxes? Sure. I had a client who owed the IRS $1.5 million and the entire amount was discharged in bankruptcy.
In Re United States v. Storey, Dr. Storey filed income tax returns for 1994 through 1997. She never paid any of the taxes she owed on the returns. “Bad, bad doctor”, the IRS said. She filed for Chapter 7 relief in March 2002 and eventually received a discharge without the court making a specific determination as to the dischargeability of the unpaid taxes. In March 2007, the United States sued the doctor to reduce to judgment her income tax liabilities and to foreclose on its tax liens. The doctor responded that her tax obligations were discharged. The United States replied that her taxes were not discharged because she had willfully attempted to evade or defeat their payment.
The district court granted summary judgment for the government, finding that the doctor’s pattern of filing income tax returns and not paying her taxes was evidence of a willful attempt to defeat the tax. The doctor appealed. The 6th Circuit said that, “The government must prove that the debtor 1) had a duty to pay taxes, 2) knew she had a duty, and 3) voluntarily and intentionally violated that duty.”
《楊清泉律師專欄》INTENTIONAL EVASION OF TAX PAYMENT MAY NEGATE BK DISCHARGE OF TAXES(PART II)
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