Opinion ID: 71013
Heading Depth: 2
Heading Rank: 2

Heading: The Orders Interpreting Section 109(e)

Text: The bankruptcy court found that: 6 Generally, a determination that there is a tax due is prima facie evidence of tax liability. I.R.C. § 7481(d); Helvering v. Taylor, 293 U.S. 507, 515, 55 S.Ct. 287, 290-91, 79 L.Ed. 623 (1935). [Verdunn] must prove by [the] preponderance of the evidence that the tax liabilities and interest on those liabilities are incorrect. In contrast, the [Commissioner] must prove by the preponderance of the evidence [that the] tax fraud liabilities are correct. I.R.C. § 7454. The taxes as expressed in the [Commissioner's] proof of claim are all, with the exception [of the tax year] 1986, based on tax fraud. There is a dispute as to the character and nature of these claims in which the [Commissioner] will have the burden of proof. Although [Verdunn] has filed income tax returns for the years in question, the tax liabilities are not readily determinable from the documents before the Court and therefore they are deemed unliquidated. 7 The district court affirmed the bankruptcy court stating that: 8 It is an undisputed fact that [Verdunn] vigorously disputed the penalties which the [Commissioner] sought to levy against him based upon alleged civil fraud, understatement of income, negligence and delinquency in filing income tax returns and had filed a petition for determination with the United States Tax Court. In this dispute as to the character and nature of the claims, [the Commissioner] has the burden of proof. I.R.C. § 7454. Although set for trial, the Tax Court had not rendered a determination as of the date of the [bankruptcy] petition regarding [Verdunn's] tax liability. Therefore, [Verdunn] now argues, and this Court agrees, that the amount of the tax liability was not readily ascertainable from the information before the bankruptcy court and were properly excluded as not readily determinable and unliquidated debts when eligibility to proceed under § 109(e) of the Bankruptcy Code was determined. 9 Both the bankruptcy court and the district court concluded that the debts were unliquidated under section 109(e) as the amounts: (1) were not readily determinable; (2) were in dispute; 9 and (3) were alleged to be entirely due to fraud, with the Commissioner bearing the burden of proof as to the fraud penalties. 10 We limit our discussion, infra part IV.C., to the first conclusion. See also supra notes 9-10 and accompanying text. 10