IN THE UNITED STATES BANKRUPTCY COURT 

 FOR THE EASTERN DISTRICT OF VIRGINIA 

Alexandria Division 

In re: ) 

 ) 

TYRONE A. CONARD, ) 

JOYCE L. CONARD, ) 

 ) 

 Debtors. ) 

______________________________________ ) 

 ) 

TYRONE A. CONARD, ) 

JOYCE L. CONARD, )

 ) 

 Plaintiffs, ) 

 ) 

 v. ) 

 ) 

INTERNAL REVENUE SERVICE, ) 

 ) 

 Defendant. ) 

______________________________________ ) 

Case No. 14-10093-KHK 

Chapter 7 

Adv. Proc. No. 16-01121-KHK 

MOTION FOR SUMMARY JUDGMENT BY INTERNAL REVENUE SERVICE 

The sole issue in this adversary proceeding is whether the Debtors’ failure to pay their 

self-reported federal income tax obligations for tax years 2004 through 2009 was willful. If so, 

these obligations are excepted from discharge under 11 U.S.C. § 523(a)(1)(C).1

Tyrone Conard, a self-employed life insurance salesperson who runs his own agency, and 

his wife, Joyce Conard, earned substantial income during 2004-2009 while making no estimated 

tax payments and paying less than 1% of the amount owed for those years. They filed joint 

income tax returns for 2004 through 2009 claiming an adjusted gross income, on average, of 

 

1

 Although the adversary complaint also seeks discharge for 2003 and 2010, there is 

no balance due on those years. 

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$203,637 per year, along with a total tax due of $516,114 for the period. They made payments 

of just $4,931 towards this obligation—less than 1% of the amount due. The Debtors never 

made a single estimated tax payment even though Tyrone Conard admits that he was aware he 

was required to make estimated income tax payments. They also never filed a return on time 

during this period. 

 As discussed below, the undisputed facts establish three independent bases for a grant of 

summary judgment in favor of the IRS. 

First, a finding of willfulness can be based solely on the undisputed filing and payment 

history set forth above. The Conards had substantial income, yet failed to file returns on time, 

make estimated tax payments, or pay the balance due when owed. Tyrone Conard admits he 

knew of each of these obligations. This alone is sufficient to support summary judgment as a 

matter of law. 

Second, Tyrone Conard admitted during his deposition that he made a conscious decision 

to put his income tax obligations “on the back burner” so he could invest his income in an 

expansion of his insurance agency. In other words, he chose to fund his business expansion 

using taxpayer dollars. This admission is a quintessential example of willfulness. 

Third, the Debtors made lavish personal expenditures while knowing that their income 

tax went unpaid. These included a Mercedes Benz SL500 ($86,281); a BMW 640i coupe 

($47,590); a Buick Lacrosse ($50,613.44); a Harley Softail motorcycle; tuition for their son 

($48,000); a membership in a boat club ($360/month); and large-screen televisions, new 

furniture, and carpet for their home. These undisputed expenditures—made with knowledge of 

an outstanding tax debt—establish a third independent basis for willfulness as a matter of law. 

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Finally, discharge of the Conards’ tax debt would lead to a fundamentally unfair result. 

As discussed below, the Conards admit that they currently receive $11,000 per month in 

residuals arising from the insurance policies that Tyrone Conard’s agency sold while the Conards 

were failing to pay income tax. In other words, Tyrone Conard used the income tax he owed to 

fund a business which is now paying residuals of $11,000 per month. He seeks to keep the 

residuals while discharging the tax debt that he used to earn them. This would constitute a 

straightforward and unjust transfer of wealth from the United States to the Conards. 

I. Undisputed Material Facts 

During 2004 through 2009, Tyrone Conard ran a life insurance sales agency that sold 

policies exclusively for American Income Life Insurance Company (“American Income”), a life 

insurance company that caters primarily to unions. See Ex. A (Depo. Tr. of T. Conard) at 8-14. 

He ran his business as a sole proprietorship called the Conard Agency. Id. at 22:2-4. American 

Income named him Director for the Virginia/Maryland/D.C. region in 1999 and encouraged him 

to expand his business by recruiting additional agents and opening new office locations. Id. at 

8:3-10:16. 

Tyrone Conard heeded the encouragement to expand his business, eventually growing the 

Conard Agency from seven agents to about thirty, with five office locations. Id. at 13:19-20; 

15:5-8; Ex. D at p. 1. He estimates that at its peak, the Conard Agency was generating about 

$60,000 per month in new annual premiums for American Income. Id. 17:10-18. 

 Tyrone Conard concedes that during this period, he understood his obligation to file 

income tax returns and make estimated tax payments and was advised of both of these 

obligations by his accountant. Id. at 33:17-34:13; Ex. D at p. 2 (“We understood our 

obligation...”). He understood that he had a balance due and admits he was receiving many 

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notices from the IRS regarding his failure to file and pay, including, eventually, an in-person 

visit from an IRS officer in 2005 or 2006. Id. 34:14-35:5; 42:1-9; 43:1-12. 

When asked why his tax obligations went unpaid, Tyrone Conard admitted that he put his 

federal tax obligations “on the back burner” in favor of investing his income back into the 

Conard Agency. Id. at 38:6-39:12; 57:5-10; 59:2-8; 60:15-61:2. He admits that he chose to 

prioritize his business expenses over his tax obligations. Id. 59:2-8; 60:15-61:2; see also Ex. B 

at 25:1-20 (J. Conard discussing T. Conard prioritization of certain expenses over taxes); Ex. D 

at p. 1 (“My income was never sufficient to finance this expansion and also to pay my taxes 

when due”). 

As an example, the Conards’ self-reported federal income tax obligation for 2004 was 

just $8,658, but remains unpaid to this day, even though they earned an adjusted gross income 

averaging of $203,637 per year in the succeeding five years and paid business expenses in excess 

of $100,000 per year during that time. Ex. C ¶ 4; Ex. A at 38:6-22. The Conards also profited 

$35,000 in cash from the sale of an investment property that Tyrone Conard sold in in 2004 or 

2005, yet chose to use this income to “help with one of the offices that I was opening at the time” 

and did not use it to pay any back taxes. Ex. A at 87:20-89:22; Ex. D p. 4-5; Ex. B at 29:14-

30:15. 

The Conards also prioritized personal expenditures over tax obligations, including: 

 An $86,281 Mercedes Benz SL500, purchased in 2005 (Ex. A at 81:4-16; Ex. E at p. 

1; Ex. D at p. 6); 

 A $47,590 2012 BMW 640i coupe (Ex. A at 81:21-82:3; Ex. F. at p. 1; Ex. B at 

38:12-14); 

 A $50,613.44 Buick Lacrosse, which Tyrone Conard owned simultaneously with his 

BMW coupe and purchased because the BMW was difficult to drive in the snow (Ex. 

A at 81:18-20; Ex. G at p. 1; Ex. B at 38:1-5; Ex. D at p. 5); 

 A Harley Softail motorcycle, purchased in 2008 or 2009 for $4,000 (Ex. A at 90:2; 

Ex. D p. 5); 

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 $48,000 worth of tuition for the Conards’ son (Ex. A at p. 85:14-87:8; Ex. B at 28:13-

29:13)2; 

 A new Optima (Ex. A at 82:4-8; Ex. D at p. 5); 

 A membership in a boat club for $360/month (Ex. A at 93:21-95:4; Ex. B at 38:15-

41:6); 

 At least $4,210 worth of expenditures at Saks Fifth Avenue (Ex. B at 50:19-51:2; Ex. 

H); 

 Whole life insurance policies with a cash surrender value of $7,932.67 at the time the 

Conards filed for bankruptcy (Ex. A at 100:5-104:20; Ex. I at p. 3); 

 Golf once a week (Ex. A at 95:5-17; Ex. D at p. 7); 

 Golf trips to Florida to attend events put on by unions (Ex. A at 90:6-14); 

 A non-work vacation to the Bahamas that was paid for partially by American Income, 

with the remainder funded by the Conards (Ex. A at 90:15-19; 92:3-93:16; Ex. B at 

34:2-18); 

 Two large-screen televisions for their home ($3,130) (Ex. A at 114:20-115:2; 116:21-

117:2); 

 $6,900 worth of new furniture for their home (Ex. B at 50:3-18). 

 In 2010, as his federal tax debt began to mount, Tyrone Conard arranged an early 

retirement from American Income and ceased writing policies for that company. Ex. A at 21:14-

22:22; 26:10-27:3. He began receiving residual payments from American Income, which he still 

receives today, that he estimates are $11,000 per month. Id. 27:4-30:22. He set up a new 

insurance agency, All Financial Care, Inc., that writes policies for multiple insurance companies. 

Id. at 21:14-22:1; 23:4-19. 

 In short, Tyrone Conard knew of his tax obligation; had the resources to satisfy it; and 

chose to divert his income to his business and to luxury purchases. On these undisputed facts, 

summary judgment is warranted as a matter of law. 

 

2

 The Conards’ interrogatory responses list the tuition at $32,000. See Ex. D p. 7. 

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II. Summary Judgment Standard 

 Summary judgment is appropriate when no genuine dispute exists as to any material fact 

and a party is entitled to a judgment as a matter of law. Fed. Civ. P. 56(a); Anderson v. Liberty 

Lobby, Inc., 477 U.S. 242 (1986). Once the moving party has met its burden of showing the 

absence of any genuine issue of material fact, the non-moving party may not rest on allegations, 

but must instead proffer specific facts showing that a genuine issue exists for trial. Matsushita 

Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); see also Harris v. Home Sales 

Co., 2012 U.S. App. LEXIS 25636 at *9 (4th Cir. 2012) (factual disputes must be both material 

and genuine) (internal citations omitted). As discussed below, the Debtors have admitted facts 

establishing willfulness as a matter of law. 

II. The Debtors’ Failure to Pay Income Tax Was Willful

Congress has specifically excepted certain tax debts from discharge. Section 

523(a)(1)(C) of Title 11 exempts from discharge any tax debt for which “the debtor . . . willfully 

attempted in any manner to evade or defeat such tax.” The government bears the burden of 

proving dischargeability. U.S. v. Clayton, 468 B.R. 763, 769-770 (M.D. N.C. 2012). “This 

policy promotes the Bankruptcy Code's goal of providing a ‘fresh start’ to the ‘honest but 

unfortunate debtor’ while recognizing that the Bankruptcy Code does not afford “a completely 

unencumbered new beginning.” Id. at 770 (citing Grogan v. Garner, 498 U.S. 279 (1991). 

Although the Fourth Circuit has issued no cases construing Section 523(a)(1)(C), “over 

time, other appellate courts have reached a consensus that the willful evasion of tax debts 

under section 523(a)(1)(C) comprises both a conduct element and a mental state element.” 

Clayton, 468 B.R. at 770. Both elements are met here based on admitted facts. 

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A. Conduct Element 

“[N]onpayment coupled with the failure to file timely returns . . . demonstrate[s] the 

conduct requirement of section 523(a)(1)(C).” Id. As set forth above, the Debtors admit nonpayment coupled with the failure to file timely returns. They paid less than 1% of their selfreported obligation for 2004-2009 while failing to file a single return on time for this period or 

make any estimated tax payments. See Ex. C ¶ 4-7. Under Clayton, these admissions establish 

the conduct element as a matter of law.3

B. Mental State Element 

In establishing that a failure to pay tax was “willful,” “[t]he Government need only 

demonstrate that the debtor's actions were willful—not that he acted with fraudulent intent.” Id.

at 771; In re Fegeley, 118 F.3d 979, 984 (3rd Cir. 1997). A debtor's actions are willful if his 

actions are “voluntary, conscious, and intentional.” Clayton, 468 B.R. at 769-770 (citing Toti v. 

United States, 24 F.3d 806, 809 (6th Cir.1994)). To meet the mental state requirement of section 

523(a)(1)(C), “the Government must prove that the debtor “(1) had a duty to file income tax 

returns and pay taxes; (2) knew that he had such a duty; and (3) voluntarily and intentionally 

violated that duty.” Id. (citing United States v. Fretz, 244 F.3d 1323, 1330 (11th Cir.2001)). 

Courts may look to several factors in deciding whether a failure to pay was willful. 

Failure to make estimated tax payments, despite income, demonstrates willfulness. Fegeley, 118 

F.3d at 984; In re Lacheen, 365 B.R. 475 (Bankr. E.D. Pa. 2007) (“As the evidence establishes 

 

3

 Under Clayton, the conduct element can also be satisfied through a showing of 

“transfers made in the face of serious financial difficulties” and a “lavish or extravagant 

lifestyle.” These factors, discussed below, establish a second independent basis for a 

finding that the conduct element has been met as a matter of law. 

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the existence of disposable income during the relevant tax years, and especially in 1995, its 

depletion without reservation for payment of taxes when due, is probative of a willful evasion of 

taxes.). In addition, “lavish spending coupled with the knowledge of tax debts is . . . [an] 

indication that a debtor acts willfully in the evasion of his tax obligations.” Clayton, 468 B.R. at 

769-770; see also Hamm v. United States, 356 B.R. 263, 285-286 (Bankr. S.D. Fla. 2006) 

(considering a debtor's significant expenditures when determining if a debtor's actions met the 

mental state requirement of section 523(a)(1)(C)). Indeed, “[a] typical case of non-dischargeable 

tax liability pursuant to § 523 of the Bankruptcy Code often involves debtors who ... live a lavish 

lifestyle they cannot afford ... while making no effort to satisfy their tax liability.” Id. (citing 

Hawkins v. Franchise Tax Bd., 447 B.R. 291, 296 (N.D. Cal. 2011)).4

 This case presents three 

independent bases for a finding that the Conards’ failure to pay was willful as a matter of law. 

First, the Conards’ undisputed filing and payment history establishes willfulness. As 

discussed above, the Conards admit that they knew of the obligation to make estimated tax 

payments; had income; and failed to make the payments. This is a straightforward admission of 

“depletion [of income] without reservation for payment of taxes when due,” and is sufficient to 

establish willfulness as a matter of law. 

 

4

 Although the government need not prove fraud, courts sometimes look to the 

traditional “badges of fraud” when assessing willfulness. Clayton, 468 B.R. at 769-770. 

Traditional badges of fraud include: “(1) the recurrence of the understatement of income 

for more than one tax year, (2) the understatement of income, (3) implausible or 

inconsistent explanations of behavior, (4) inadequate records, (5) transfer of assets to a 

family member, (6) transfer for inadequate consideration, (7) transfer that greatly reduced 

assets subject to IRS execution, and (8) transfers made in the face of serious financial 

difficulties.” Id. (citing Hassan v. United States, 301 B.R. 614, 620 (S.D.Fla.2003)). 

These factors are not discussed here, because the other factors establish willfulness as a 

matter of law. 

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Second, Tyrone Conard’s admission that he put his federal tax obligations “on the back 

burner” in favor of other expenses constitutes a direct admission of willfulness. Ex. A at 38:6-

39:12. Under Clayton, this is direct evidence that Tyrone Conard “knew that he had such a duty 

[to pay taxes]” and “voluntarily and intentionally violated that duty.” Clayton, 468 B.R. at 769-

770. 

Third and finally, the lavish spending on luxury items and business investments are 

another independent basis for a finding of willfulness. When a person owes back taxes, the 

purchase of any “non-necessities such as vacations and private school” are an indication of 

willful failure to pay taxes. Clayton,468 B.R. at 770 (citing In re Volpe, 377 B.R. 579, 587 

(Bankr. N.D. Ohio 2007)). Here, the Conards admit to the purchase of many “non-necessities” 

while knowing that their tax burden went unpaid. 

As one example, in 2005, the Conards purchased a Mercedes for a total sale price of 

$86,281. This amount was ten times their prior year’s tax burden ($8,658), towards which they 

paid only $357.44, and which remains unpaid to this day. Similarly, in 2012, they purchased a 

BMW for a total sale price of $47,590 and 2011 Buick Lacrosse for a total sale price of 

$50,613.44. These amounts could have paid the tax owed for 2009, 2008, and part of 2007. The 

Conards willfully chose not to use this money to pay their taxes.

III. Conclusion 

Far from Supreme Courts’ portrait of the “honest but unfortunate debtor,” Tyrone Conard 

knowingly and willfully chose to use money he owed to the United States to fund his business, 

from which he profits to this day. Instead of making estimated tax payments, which he knew 

were due and owing, he sank additional funds into his insurance business, which provided him 

with substantial income during 2004-2009 and continues to provide him with $11,000 per month 

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in residuals. He now seeks to keep these residuals—earned using taxpayer money—while 

extinguishing the tax debt. For the reasons stated above, the court should avoid this 

fundamentally unfair result and grant the IRS’s motion for summary judgment. 

Dated: April 10, 2017 DAVID A. HUBBERT 

Acting Assistant Attorney General 

/s/ Nelson Wagner 

NELSON WAGNER 

989413 (D.C.) 

Trial Attorney, Tax Division 

U.S. Department of Justice 

P.O. Box 227 

Washington, D.C. 20044 

202-616-3369 (v) 

202-514-6866 (f) 

Nelson.Wagner@usdoj.gov

CERTIFICATE OF SERVICE 

I hereby certify that on April 10, 2017, I filed the foregoing via CM/ECF, which will 

electronically serve notice of filing on all parties to this action, including the following: 

Counsel for Debtors

Robert R. Weed 

Law Offices Of Robert Weed 

300 Garrisonville Rd., Suite 201 

Stafford, VA 22554 

Email: robertweedlaw@yahoo.com 

Trustee

Kevin R. McCarthy 

McCarthy & White, PLLC 

1751 Pinnacle Dr. Ste 1115 

McLean, VA 22102 

Email: krm@mccarthywhite.com 

/s/ Nelson Wagner 

NELSON WAGNER 

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