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Parties Involved:
Henry N Petersen
Plaintiff
Internal Revenue Service
Defendant

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FILED 

OCT 23 2011 

UNITED STATES BANKRUPTCY COURT 

EASTERN DISTRICT OF CALIFORNIA 

UNITED STATES BANKRUPTCY COURT 

EASTERN DISTRICT OF CALIFORNIA 

SACRAMENTO DIVISION 

In re Case No. 14-24756-A-7 

HENRY PETERSEN, 

Debtor. 

I HENRY PETERSEN, 

Adv. No. 14-2255 

Plaintiff, 

Date: October 19, 2017 

I VS. Time: 9:30 a.m. 

Dept: A 

I INTERNAL REVENUE SERVICE, 

Defendant. 

FINDINGS OF FACT AND CONCLUSIONS OF LAW 

The plaintiff and debtor, Henry Petersen, brought this 

adversary proceeding against the United States in order to 

determine the dischargeability of his income tax liabilities for 

1 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, and 2009. See 11 

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Filed 10/23/17 Case 14-02255 Doc 37
1 U.S.C. § 523(a) (1). 

2 This court is the proper venue for this proceeding. See 28 

3 U.S.C. § 1409. 

4 The claim concerns the dischargeability of a debt pursuant 

5 to 11 U.S.C. § 523(a) (1). This is a matter within the court's 

6 core jurisdiction. See 28 U.S.C. § 157(b) (2) (I). The court may 

7 enter a final order. Stern v. Marshal, 131 S. Ct. 2594 (2011) 

8 and Exec. Benefits Ins. Agency v. Arkison (In re Bellingham Ins. 

9 Agency, Inc.) , 134 S. Ct. 2165 (2014) 

10 The proceeding was tried by the court without a jury on 

11 October 19, 2017, at 9:30 a.m. While the court received brief 

12 testimony from the plaintiff concerning the reason he failed to 

13 file timely tax returns for nine years, all other facts were 

14 agreed to by the parties and were presented in a written 

15 stipulation filed on September 15, 2017. 

16 In addition to stipulating to most of the material facts, 

17 the parties agreed that the plaintiff's income tax liabilities 

18 for 2003, 2004, 2005, 2006, and 2009 were discharged in the 

19 plaintiff's bankruptcy case. They further agreed that all 

20 penalties and interest on the taxes due for all years at issue, 

21 1999 through 2006 and 2009, were discharged. 

22 Therefore, only the plaintiff's income tax liabilities for 

23 1999, 2000, 2001, and 2002 are at issue. Based on the facts and 

24 the law discussed below, the court concludes that these taxes are 

25 excepted from discharge by 11 U.S.C. § 523(a) (1). 

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Filed 10/23/17 Case 14-02255 Doc 37
Findings of Fact 

For 1999 through 2002, the plaintiff did not file his 

federal income tax returns when they were due. Nor did he 

request extensions to file those returns. 

Around September 25, 2005, the plaintiff received 

Notices of Deficiency from the Internal Revenue Service for his 

1999, 2000, 2001, and 2002 federal income taxes. His receipt of 

these notices did not prompt him to file his delinquent returns 

nor did the plaintiff file a petition with the Tax Court within 

90 days of receiving the Notices. 

On February 27, 2006, after the time to petition the 

Tax Court had expired, the Internal Rvenue Service assessed the 

tax liabilities asserted in the Notices of Deficiency: $11,072 

for 1999; $10,675 for 2000; $9,762 for 2001; and $6,889 for 2002. 

In May 2006, the plaintiff received notices that the. 

Internal Revenue Service intended to levy in order to collect the 

taxes it had assessed. 

In February 2007, the Internal Revenue Service recorded 

federal tax liens for these taxes. 

The plaintiff prepared his federal income tax returns 

for 2001 and 2002 in May 2007. However, he did not sign these 

returns until June 2011 when they were also filed. 

The plaintiff does not recall when his 1999 return was 

prepared, but it was signed in May 2007 and, like the returns for 

2001 and 2002, it was not filed until June 2011. 

Nor does the plaintiff recall preparing his 2000 

return, but it was signed and filed in June 2011. 

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Filed 10/23/17 Case 14-02255 Doc 37
1 9. The taxes reported on the plaintiff's four returns were 

2 lower than the taxes assessed by the Internal Revenue Service. 

3 The Internal Revenue Service accepted the taxes reported by the 

4 plaintiff and abated its assessments to $7,177 for 1999; $9,908 

5 for 2000; $8,707 for 2001; and $5,421 for 2002. 

6 10. Why did the plaintiff fail to file timely tax returns 

7 for 1999 through 2002? Why did he fail to request extensions? 

8 Why did he ignore the September 2005 Notices of Deficiency, the 

9 February 2006 tax assessments by the Internal Revenue Service, 

10 the May 2006 notices of levy, and the February 2007 tax liens? 

11 Why did the plaintiff prepare returns in May 2007 but not file 

12 them until June 2011? The plaintiff offers the same answer to 

13 all of these questions. His spouse died in 1999 and his grief 

14 left him devastated and unable to focus on preparing and filing 

15 his tax returns. 

16 11. While the court can readily accept that the death of 

17 his spouse left the plaintiffemotionally fragile and unable, in 

18 the short term, to deal with his taxes, it does not accept that 

19 this explains or excuses his failure to file returns and pay 

20 I taxes over an 11-year period. 

21 12. Nor does the factual record support the plaintiff's 

22 I claim that he was so incapacitated by his grief that he was 

23 I unable to file these returns. 

24 a. First and foremost, the plaintiff continued his 

25 employment as a waiter throughout 1999 through 2011. 

26 b. During this period of time, the plaintiff 

27 shouldered the financial responsibility of supporting 

28 his adult daughter as well as two grandchildren. 

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Filed 10/23/17 Case 14-02255 Doc 37
C. There is no evidence the plaintiff received 

medical or psychiatric care for depression or some 

other condition that prevented him from filing his 

returns. 

There is no nonmedical corroboration of a lengthy 

incapacity. 

In 2005, before preparing his returns, the 

plaintiff admits that he had the presence of mind to 

attempt to negotiate two payment arrangements with a 

local Internal Revenue Service office. He even made 

some payments pursuant to his offers before they were 

rejected by the Internal Revenue Service. 

These facts indicate the plaintiff understood his obligation to 

file his returns and pay the taxes and that he had the capacity 

and ability to file returns. 

On May 5, 2014, the plaintiff filed his chapter 7 

bankruptcy petition. He has received a discharge. This 

adversary proceeding will determine whether the income taxes due 

for 1999 through 2002 are excepted from that discharge by 11 

U.S.C. § 523(a) (1). Their dischargeability hinges on whether the 

late-filed returns qualify as returns within the meaning of 

section 523(a) (1) and the "hanging paragraph" following section 

523(a) (19) (cited herein as 11 U.S.C. § 523(a)(*)). 

To the extent any of the conclusions of law below are 

findings of fact, they are incorporated by reference as findings 

of fact. 

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Filed 10/23/17 Case 14-02255 Doc 37
I. Conclusions of Law 

15. To the extent any of the foregoing findings of fact are 

3 conclusions of law, they are incorporated by reference as 

4 conclusions of law. 

5 16. Section 523(a) (1) (i) excepts from discharge income 

6 taxes for which the debtor has not filed a return. 

7 17. If a late return is filed, section 523(a) (1) (ii) 

8 provides that income taxes are not dischargeable if the return 

9 was filed within two years of the filing of the bankruptcy 

10 petition. 

11 18. The plaintiff maintains that he filed late returns for 

12 1999 through 2002 more than two years before filing his 

13 bankruptcy ca-se. Therefore, he argues that the taxes for these 

14 years are dischargeable. 

15 19. However, the plaintiff's late-filed returns are not 

16 returns for purposes of section 523(a) (1) due to the effect of 

17 section 523(a) (*), which provides in relevant part: "For purposes 

18 of [section 523(a) (1)],the term "return" means a return that 

19 satisfies the requirements of applicable nonbankruptcy law 

20 (including applicable filing requirements) . 

21 20. The applicable nonbankruptcy law is federal tax law. 

22 I The Internal Revenue Code, however, does not define what 

23 constitutes a federal income tax return. Instead, Beard v. 

24 Commissioner, 82 T.C. 766 (1984), affirmed 793 F.2d 139 (6th Cir. 

25 1986) (per curiam), offers a judicially crafted definition. 

26 Under it, a filing qualifies as a return if it provides 

27 "sufficient data to calculate tax liability"; it "purport[s] to 

28 be a return"; the taxpayer has made "an bonest and reasonable 

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Filed 10/23/17 Case 14-02255 Doc 37
attempt to satisfy the requirements of the tax law"; and the 

taxpayer has "execute[d] the return under penalties of perjury." 

jj. at 777. 

21. The Ninth Circuit has adopted the Beard definition of 

what constitutes a return for purposes of section 523(a) (1) . See 

Smith v United States (In re Smith), 828 F.3d 1094, 1096 (gth 

'a Cir. 2016); In re Hatton, 220 F.3d 1057 (9th Cir. 2000) 

8 22. Therefore, in order to qualify as returns, the 

9 plaintiff's filings for.1999 through 2002 had to be an honest and 

10 reasonable attempt to comply with the requirement that timely 

11 returns be filed. They were not. 

12 23. The plaintiff's filings for 1999 through 2002 were made 

13 between 11 and 8 years after they were due, and more than 5 years 

14 after the Internal Revenue Service assessed the plaintiff's 

15 income tax liabilities without the benefit of his returns. The 

16 plaintiff received communications from the Internal Revenue 

17 Service in 2005, 2006 and 2007 about his unfiled returns but he 

18 chose to ignore them. The emotional toll wrought by the death of 

19 the plaintiff's spouse does not adequately explain the failure to 

20 file returns over this protracted period of time. See Paragraphs 

21 12(a) through (e) above. 

22 24. The court sees no principled way of distinguishing this 

23 case from Smith. In Smith the debtor submitted a return seven 

24 years late and three years after the Internal Revenue Service had 

25 I assessed a deficiency against him. The Ninth Circuit concluded 

26 I that this was not a return within the meaning of section 

27 523(a) (1) and section 523(a) (*) because it was not an "honest and 

28 reasonable" attempt to comply with the filing requirements of the 

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1 tax code. Smith, 828 F.3d at 1096. 

2 25. Like the Ninth Circuit in Smith, it is unnecessary in 

3 this case to determine whether a filing after the return's due 

4 date can be a return for purposes of section 523 (a) (1) . Three 

5 other circuits, however, have concluded that the filing deadline 

6 is an "applicable filing requirement." See 11 U.S.C. § 

7 523(a) (*) . In these circuits, a return filed just one day late 

8 is not a return for purposes of section 523(a) (1). Were this 

9 court to follow this line of cases, the plaintiff's taxes would 

10 be nondischargeable. 

11 26. The Internal Revenue Service takes a position between 

12 the Ninth Circuit's decision in Smith and the one-day-late rule. 

13 In its view, a late-filed return may be a return for purposes of 

14 section 523(a) (1) provided it is filed before a debtor's taxes 

15 are assessed without the benefit of a return. Such a late return 

16 fulfills its essential purpose - self-reporting and assessment of 

17 income tax. 

18 27. In this case, the plaintiff's late-filed returns for 

19 1999 through 2002 were filed after the Internal Revenue Service 

20 had assessed his tax liabilities. Therefore, even under the 

21 Internal Revenue Service's policy, these taxes would be 

22 nondischargeable. It appears, however, that the Internal Revenue 

23 Service's stipulation that the plaintiff's taxes for 2003, 2004, 

24 2005, 2006 and 2009 are dischargeable is based on the fact that 

25 those returns, while filed late, were filed before the Internal 

26 Revenue Service had assessed the taxes without the returns. 

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Conclusion 

Therefore, as to tax years 1999, 2000, 2001, and 2002, the 

income taxes owed by the plaintiff to the Internal Revenue 

Service are made nondischargeable by section 523(a) (1) because he 

failed to file returns within the meaning of section 523(a) (*) 

Based on the stipulation of the parties, the interest and 

penalties for these tax years are dischargeable as are all taxes, 

interest, and penalties for tax years 2003, 2004, 2005, 2006, and 

2009. 

Counsel for the Internal Revenue Service shall lodge a 

proposed judgment. 

Dated: SOC.A 7of9 By the Court 

ihael S. McManus 

United States Bankruptcy Judge 

Filed 10/23/17 Case 14-02255 Doc 37
Dated: 10/23/2017 By 

De 

United States Bankruptcy Court 

Eastern District of California 

Certificate of Mailing 

The undersigned deputy clerk in the office of the United States Bankruptcy 

Court for the Eastern District of California hereby certifies that a copy of the 

document to which this certificate is attached was mailed today to the following 

entities at the addresses shown below or on the attached list. 

Henry N Petersen Boris Kukso Robert L. Goldstein 

200 Coghlan St. P0 Box 683 100 Bush Street, Suite 501 

Vallejo CA 94590 Washington DC 20044 San Francisco CA 94104 

Filed 10/23/17 Case 14-02255 Doc 37