Opinion ID: 364073
Heading Depth: 1
Heading Rank: 2

Heading: Third Quarter

Text: 19 The corporation was not obligated to pay the taxes for the third quarter (July, August and September) until October 31, which was after the dissolution of the corporation. A responsible officer may be liable, as a matter of law, for a willful failure to pay taxes which were not due when his corporation folded. Teel v. United States, 529 F.2d 903, 906 (9th Cir. 1976).
20 Treasury Regulation 31.6302(c)-1(a)(1) obligated the corporation to deposit its collected taxes in a Federal Reserve Bank each month. The corporation failed to do it; instead, it kept the money in its general account and it paid other creditors. Payments to other creditors when monthly deposits were overdue showed that the failure to pay collected taxes was willful. Sherwood v. United States, 246 F.Supp. 502, 508 (E.D.N.Y.1965); Browne v. United States, 234 F.Supp. 19 (D.Minn.1964). The District Court properly granted summary judgment against Barnett for the penalty equal to the taxes collected in the months of July and August.
21 The corporation was not yet obligated to pay or deposit the taxes collected for September when it was dissolved. 22 Barnett contends that the September penalty is therefore different from the penalties for the other months. He contends that payments to other creditors before an employer is obligated to deposit funds do not establish a preference for the other creditors. He also contends that the corporation had sufficient funds in the bank to pay the government until the bank's unforeseen setoff. 23 The statute does not impose a penalty whenever collected taxes are not paid to the government. Responsible officers are liable only for willful conduct. In our view Barnett did not become liable as a matter of law when he paid other creditors before he was obligated to deposit the withheld taxes and when he had ample funds in the account to cover the taxes. Browne, supra. There is a conflict in the evidence on whether Barnett intended to pay September taxes when due. Barnett may ultimately be liable for willfully failing to pay them but that is a matter for determination after trial and not on a summary judgment. 24 Summary judgment in favor of the government and against Barnett for penalties on the taxes withheld for the month of September 1965 is reversed and remanded. In all other respects, the judgment in favor of the government and against Barnett is affirmed.