United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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No. 03-1326

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In re: Dennis Harker, *

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 Debtor, *

 - - - - - - - - - - - - - - - - - - - - - - - - - Appeal from the United States

Bankruptcy Appellant Panel

Dennis Harker, *

*

 Appellant, *

*

v. *

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United States of America (Acting *

through the Internal Revenue Service), *

*

 Appellee. *

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Submitted: December 17, 2003

Filed: February 10, 2004

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Before MORRIS SHEPPARD ARNOLD, HEANEY, and RILEY, Circuit Judges.

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HEANEY, Circuit Judge.
1

 See, e.g., In re Harker, 286 B.R. 84 (B.A.P. 8th Cir. 2002); In re Harker, No.

97-4088-CH, 2002 WL 1058108 (Bankr. S.D. Iowa April 15, 2002).

2

 When the properties were finally sold, they yielded total proceeds of

$283,578.16, which the IRS applied to Harker’s 1987 tax liabilities.

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This is a tax evasion case which has been in the courts for over a decade. The

facts have been discussed several times below1

 and are summarized here for the

purposes of this appeal. 

In 1994, the United States Tax Court determined that Dennis Harker was

responsible for certain tax deficiencies and fraud penalties for the years 1985-87.

Harker v. Comm’r, 68 T.C.M. (CCH) 1272 (1994), aff’d, 82 F.3d 806 (8th Cir. 1996).

On May 1, 1995, the Tax Court entered a decision stating the amount of Harker’s tax

deficiencies. On May 16, 1995, Harker filed a Chapter 13 petition in bankruptcy

court. The bankruptcy court determined that the petition was filed in bad faith and

ordered Harker to convert the case to a Chapter 7 proceeding within 20 days, or an

automatic dismissal would be entered. In re Harker, No. 95-1417-CH, 1996 WL

905910 (Bankr. S.D. Iowa June 14, 1996), aff’d, 112 F.3d 513 (8th Cir. 1997)

(unpublished table opinion). Harker failed to convert the case and his Chapter 13

bankruptcy case was dismissed.

On July 12, 1996, the IRS recorded notices of federal tax liens with respect to

Harker’s 1985-87 liabilities totaling $1,073,298.20, and announced its intent to sell

two of Harker’s properties.2

 Harker filed a motion requesting that the court find the

filing of the tax liens void as a violation of the automatic stay issued in the Chapter

13 case. The bankruptcy court denied the motion, holding that the automatic stay

terminated when Harker failed to convert his Chapter 13 case to a Chapter 7 case

within the 20-day period in accordance with its prior order.
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On September 8, 1997, Harker filed a Chapter 7 bankruptcy case and on

September 23, 1997, he filed a complaint commencing this adversary proceeding to

determine the dischargeability of his 1985-87 tax liabilities under the bankruptcy

code. The bankruptcy court determined that the 1985 and 1986 tax, penalties, and

interest, and the 1987 liabilities, which did not include tax, were dischargeable. The

United States appealed and the district court affirmed the bankruptcy court’s

determination with respect to the penalties for 1985-87 and the taxes for 1987, but

reversed the bankruptcy court’s conclusion as to the taxes and interest for 1985 and

1986. The district court then remanded the case to the bankruptcy court to determine

the amount of Harker’s nondischargeable taxes and interest.

On remand, the bankruptcy court held a hearing on the issue of the amount of

the nondischargeable liabilities. The United States moved to supplement the record

with a declaration by IRS Revenue Officer Howard Hoy. Harker objected to the

motion to supplement the record, complaining that he would be denied the

opportunity to cross examine Hoy if the declaration was filed. The bankruptcy court

did not allow the filing of the Hoy declaration, but reopened the record for additional

oral testimony from Hoy. At the close of evidence, the bankruptcy court entered an

order determining the amount of Harker’s tax, interest, and other nondischargeable

liabilities to be $76,819.54 for 1985 and $532,761.96 for 1986. In re Harker, 2002

WL 1058108 at *8. The bankruptcy appellate panel (BAP) affirmed the bankruptcy

court’s order, In re Harker, 286 B.R. 84 (B.A.P. 8th Cir. 2002), and this appeal

followed. Harker now argues that the bankruptcy court: (1) erred in finding that the

government carried its burden of proof in showing that Harker owed any tax or

interest for the years 1985 and 1986; (2) erred in holding that the tax lien on his

property was valid and that the payments credited from the sale were involuntary; (3)

abused its discretion in reopening the record to allow for additional testimony from

Hoy; and (4) erred in refusing to exercise its equitable powers in favor of Harker. We

reject these arguments and now affirm as well.
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ANALYSIS

Like the BAP, our court reviews the bankruptcy court’s factual findings for

clear error and its conclusions of law de novo. In re Vote, 276 F.3d 1024, 1026 (8th

Cir. 2002).

On appeal, Harker first argues that the bankruptcy court erred in finding that

the government carried its burden of proof in showing that Harker owed any tax or

interest for the years 1985 and 1986. According to Harker, the court erred in finding

that the certified tax assessments constituted prima facie evidence of Harker’s tax

liability. Harker argues that such a “presumption of correctness” was inappropriate

in this case alleging that the tax assessed by the Tax Court does not match Hoy’s

testimony as to the amount of tax owed. This difference, suggests Harker, makes the

assessment inaccurate on its face; thus the government did not meet its burden of

proof, nor did the burden shift to Harker.

We disagree. “Tax assessments made by the IRS are presumed correct and the

taxpayer bears the burden of proving, by a preponderance of the evidence, that the

assessment is erroneous.” N.D. State Univ. v. United States, 255 F.3d 599, 603 (8th

Cir. 2001). Harker did not present any affirmative testimony or evidence regarding

the correct amount of the 1985 and 1986 liabilities. Instead, Harker merely asserts

that the tax assessed by the Tax Court does not match the tax presented in Hoy’s

testimony. After reviewing the record, we fail to see this discrepancy and such a

blanket assertion, without more, does not rise to the level necessary to dispute the

“presumption of correctness.” Furthermore, pursuant to 11 U.S.C. § 505(a)(2)(A),

a bankruptcy court may not determine “the amount or legality of a tax . . . if such

amount or legality was contested before and adjudicated by a judicial or

administrative tribunal of competent jurisdiction.” Accordingly, the bankruptcy court
3

 This same analysis applies to Harker’s additional argument that he was not

properly credited for certain payments made prior to the May 1, 1995 Tax Court

decision. The bankruptcy court and the BAP accurately concluded that Harker was

precluded by the prior Tax Court decision from challenging the application of these

payments. 

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did not have jurisdiction to redetermine Harker’s tax liability which was established

in a prior Tax Court decision.3

Harker next argues that the bankruptcy court erred in finding that the tax lien

on his property was valid. According to Harker, since the lien on his property was

filed prior to the dismissal of his Chapter 13 proceeding, the tax lien was not valid

because liens cannot attach to property until it is shown that the taxes assessed will

not be discharged in a bankruptcy proceeding. Harker further argues that since the

lien was not effective, no sale could be undertaken by the IRS, and any payment

credited from the sale must be considered voluntary and attributed to principal, not

interest, as the IRS did. 

The district court remanded this case to the bankruptcy court with the specific

mandate of determining the amount of Harker’s nondischargeable tax liabilities.

Arguments about the validity of a lien, therefore, are outside the scope of the remand

order and this appeal. Thornton v. Carter, 109 F.2d 316, 319-20 (8th Cir. 1940)

(holding that a lower court is bound by the decree of the appellate court and “can only

enter a judgment or decree in strict compliance with the [appellate court’s] mandate”).

As stated by the BAP, the bankruptcy court had no authority to decide any issue that

did not “directly influence the calculation of taxes and interest due.” (App. at 267.)

In addition, because the proceeds from the sale of Harker’s properties were

obtained through a legal proceeding in which the government sought to collect

delinquent taxes, they are considered involuntary payments. United States v.

Pepperman, 976 F.2d 123, 127 (3d Cir. 1992). The IRS may apply involuntary
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payments to whichever liability of the taxpayer it chooses. In re Jehan-Das, Inc., 925

F.2d 237, 238 (8th Cir. 1991). 

Harker next argues that the bankruptcy court abused its discretion in reopening

the record to allow for the testimony of Hoy nearly a year after the record was closed.

“A decision to reopen the record is within the sound discretion of the trial court.” In

re Grimm, 168 B.R. 102, 106 (Bankr. E.D. Va. 1994). Here, the bankruptcy court

found that the “current state of the record” was deficient to determine Harker’s

nondischargeable tax liability as mandated by the district court. (App. at 283.)

Harker had at least three months to prepare for Hoy’s testimony and was given the

opportunity to cross-examine Hoy. Based on this record, we find no abuse of

discretion on behalf of the bankruptcy court in reopening the record. 

Finally, Harker asks the court to use it equitable powers to bring an end to his

obligations to the IRS. This we refuse to do.

CONCLUSION

Since filing the briefs in this case, the United States has notified this court of

an error in the amounts assessed against Harker in favor of the United States.

Therefore, although we affirm the bankruptcy court’s findings in their entirety, we

remand this case back to the bankruptcy court for the limited purpose of entering a

corrected judgment, in accordance with the letter from the United States, reducing the

amount of Harker’s nondischargeable liabilities to $65,748.16 for 1985 and

$466,006.15 for 1986.

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