Source: https://openjurist.org/519/f2d/282/dolard-mcgugin-v-district-director-of-internal-revenue
Timestamp: 2017-08-21 12:47:32
Document Index: 121859310

Matched Legal Cases: ['§ 11', '§ 1291', '§ 47', '§ 11', '§ 102', '§ 102', '§ 75', '§ 2201', '§ 192', '§ 6012', '§ 1', '§ 102', '§ 11', '§ 6871', '§ 11', '§ 35', '§ 11', '§ 11', '§ 102', '§ 11', '§ 11']

519 F2d 282 Dolard McGugin v. District Director of Internal Revenue | OpenJurist
519 F. 2d 282 - Dolard McGugin v. District Director of Internal Revenue
519 F2d 282 Dolard McGugin v. District Director of Internal Revenue
519 F.2d 282
75-2 USTC P 9558
In the Matter of Jean Barclay DOLARD, Bankrupt.
William A. McGUGIN, Trustee, Petitioner-Appellant,
DISTRICT DIRECTOR OF INTERNAL REVENUE et al., Respondents-Appellees.
The Referee in Bankruptcy (Referee) on June 22, 1972, pursuant to Section 2a(2A) of the Bankruptcy Act, as amended in 1966, 11 U.S.C. § 11(a)(2A) (hereinafter 11(a)(2A)), ordered, inter alia, "that . . . (W. A. McGugin, as trustee of the Bankrupt's estate, (Trustee)) . . . is not personally liable for any taxes which hereafter may be assessed against this Estate." The District Court on review by order dated December 18, 1972, held that the Referee was without jurisdiction to grant declaratory relief and reversed the Referee's order on the authority of In re Statmaster Corporation, 465 F.2d 978 (5th Cir. 1972) (hereinafter Statmaster).1 The Trustee appeals. We note this Court's jurisdiction under 28 U.S.C. § 1291 and 11 U.S.C. § 47, and reverse.
First, that the Referee was vested with jurisdiction to entertain the petition and to hear and determine the amount or legality of any accrued and unpaid federal income tax under and pursuant to the provisions of § 11(a)(2A); and
Secondly, his prayer for an adjudication that the amount of taxes payable was "nothing" and protective relief were put "Off Calendar"; hence, the Referee did not hear and determine any question arising as to the amount or legality of any unpaid tax, but only exercised his jurisdiction to "determine actual and necessary costs and expenses" incurred in the administration of the estate, which necessarily included any taxes accruing after bankruptcy, Section 62a of the Bankruptcy Act, 11 U.S.C. § 102 (hereinafter § 102); McColgan v. Maier Brewing Co., 134 F.2d 385 (9th Cir. 1943) (hereinafter McColgan, and to windup and close the estate expeditiously, 11 U.S.C. § 75(a)(1). Accordingly, claims the Trustee, the District Court misconstrued the issues and erroneously considered the petition as a claim for declaratory relief which is barred by 28 U.S.C. § 2201, and the order reversing the Referee's order should be reversed.
It is important to note at the outset the responsibility of the Trustee in bankruptcy with reference to accrued and unpaid federal income taxes. A trustee in bankruptcy is not personally liable for federal taxes accruing either before or after bankruptcy except as may be imposed by the provisions of 31 U.S.C. § 192 (liability of fiduciaries) and 26 U.S.C. § 6012(b) (trustees having possession of property of a corporation). However, the trustee for the estate of an individual bankrupt must file a tax return on behalf of the bankruptcy estate. See Rev. Rule 68-48, 1968-1 C.B. 301, 302. The estate of an individual in bankruptcy is not a taxable entity separate from the person for whom the fiduciary is acting, I.R.S.Reg. § 1.641(b)(2), and the bankrupt must file his own Form 1040 tax return.
The issue on appeal is narrowed by IRS's briefing statement that it is undisputed that "the Bankruptcy Court has plenary power to hear and determine tax controversies (§§ 102 and 104, . . . § 11(a)(2A), and § 6871(b) of the Internal Revenue Code), but just as it was clear Congress intended bankruptcy courts to pass upon tax matters accruing prior to bankruptcy only if an actual tax liability had been ascertained by the District Director and a proof of claim had been filed by the Commissioner, it is equally evident that Congress intended the same procedure with respect to tax matters accruing after bankruptcy."
This Court has today rejected that premise of an IRS self-imposed " proof of claim" restriction or prerequisite upon the Bankruptcy Court's jurisdiction under § 11(a)(2A) to hear and determine the amount and legality of unpaid income tax indebtedness accruing prior to bankruptcy, and the dischargeability thereof under Section 17 of the Bankruptcy Act, as amended in 1966 and 1970, 11 U.S.C. § 35(a) and (c), and held that such jurisdiction was vested by Congress in the Bankruptcy Court whether or not IRS had made prior claim, notice of deficiency or assessment for unpaid income tax. In re Gwilliam, 519 F.2d 407 (9th Cir. 1975) (No. 74-2350).
We discern no logical reason why the expressed language of § 11(a)(2A) should not be read and applied with equal force and effect to federal income taxes accruing after bankruptcy, and we subscribe to Professor Collier's teaching that "the immaterial elements not affecting the (Bankruptcy Court's) jurisdiction include the following: . . . (3) whether the tax arose prior to or after bankruptcy." Gwilliam, supra at 409; 3A Collier on Bankruptcy P 64.407 at 2234-35.
We here hold that the absence of a prior IRS claim, notice of deficiency or assessment does not impede or vitiate the jurisdiction of the Bankruptcy Court under § 11(a)(2A), separate and apart from its jurisdiction under § 102, to hear and determine the amount or legality of any unpaid federal income taxes accruing after bankruptcy, and to relieve the Trustee from liability therefor as an item of cost or expense of his administration upon appropriate order of closure of the bankruptcy proceedings and discharge of the Trustee.
Statmaster interpreted the legislative history behind the enactment of § 11(a)(2A) to be in conflict with "(a) broad reading of (§ 11(a)(2A) which) would appear to give the bankruptcy court jurisdiction where no claim has yet been filed by the Internal Revenue Service, In re Curtis, W.D.Mich.1969 1 U.S.T.C. P 9433." However, Statmaster found at 981 that it was not "necessary to resolve (that) issue in (its) disposition of the . . . case," or at 982 the "question of governmental immunity or the substantive question of a trustee's liability for tax on income arising during the period of liquidation of the bankrupt estate," and held that the relief sought by the Trustee was "a mere declaratory judgment as to the tax effects of a proposed (corporate reorganization)" for which the Referee lacked jurisdiction