Source: https://www.losangelesbankruptcylawyerblawg.com/2017/11/bankruptcy-court-disallows-proof-claim-filed-debtors-behalf-irs-tax-debts.html
Timestamp: 2018-01-18 11:43:02
Document Index: 775187017

Matched Legal Cases: ['§ 502', '§ 502', '§ 1305', '§ 502', '§ 502', '§ 507']

Bankruptcy Court Disallows Proof of Claim Filed by Debtors on Behalf of IRS for Tax Debts — Los Angeles Bankruptcy Lawyer Blawg — November 13, 2017
In response to the trustee’s objection, the debtors argued that they could file a POC for income tax debt that “arise[s]…after the commencement of the case.” 11 U.S.C. §§ 502(i), 507(a)(8). Since their 2013 tax return was not due until after they had filed their petition, they claimed, they could file a POC for that year’s tax debt. The question for the bankruptcy court was therefore whether § 502(i) or § 1305(a) applied.
The bankruptcy court ruled in the trustee’s favor, finding that § 502(i) did not apply in the debtors’ circumstances. It identified two possible scenarios in which § 502(i) would apply, based on Ninth Circuit precedent:
1. Section 502(i) is based on § 507(a)(8), which addresses taxes due during a three-year “lookback period” prior to the petition date. In re Jones, 420 B.R. 506, 510 (BAP 9th Cir. 2009). The debtors’ 2013 tax return, however, was due after they filed their petition.
2. Section 502(i) could also apply to taxes incurred before a debtor files a petition, but payable afterwards. In re Joye, 578 F.3d 1070, 1076 (9th Cir. 2009). Federal income tax is considered to be “incurred” on the last day of the tax year. In re Pacific-Atlantic Trading Co., 64 F.3d 1292, 1299-1300 (9th Cir. 1995). The debtors therefore incurred their 2013 income tax debt on December 31, 2013, several days after they filed their Chapter 13 petition.
For over 20 years, bankruptcy attorney Devin Sawdayi has helped Los Angeles individuals and families repair their finances through the Chapter 7 and Chapter 13 bankruptcy processes. Contact us today online or at (310) 475-939 to schedule a free and confidential consultation with an experienced and knowledgeable financial advocate.
Photo credit: By BenFrantzDale (Own work) [GFDL, CC-BY-SA-3.0 or CC BY-SA 2.5-2.0-1.0], via Wikimedia Commons.