Home > Tax issues > In re: ELIZABETH KATHERINE LOVING, Debtor. ELIZABETH KATHERINE LOVING, Plaintiff, v. UNITED STATES OF AMERICA, Defendant

In re: ELIZABETH KATHERINE LOVING, Debtor. ELIZABETH KATHERINE LOVING, Plaintiff, v. UNITED STATES OF AMERICA, Defendant

Attorney, Mobile, Alabama
Arthur P. Clarke, Attorney for the Debtor, 
Mobile, Alabama
In re: ELIZABETH KATHERINE LOVING, Debtor.
ELIZABETH KATHERINE LOVING, Plaintiff,
v.
UNITED STATES OF AMERICA, Defendant.
Case No.: 11-01439-MAM-7
Adv. Proc. No.: 11-00141
UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF ALABAMA MOBILE 
DIVISION
Dated: August 29, 2011
ORDER GRANTING MOTION FOR SUMMARY JUDGMENT AND AWARDINGJUDGMENT 
OF NONDISCHARGEABILITY TO DEFENDANT
        Charles Baer, Assistant United States 
Attorney, Mobile, Alabama
Arthur P. Clarke, Attorney for the Debtor, 
Mobile, Alabama
This case is before the Court on the United 
States' Motion for Summary Judgment. The 
Court has jurisdiction to hear this matter 
pursuant to 28 U.S.C. §§ 157 and 1334 and the 
Order of Reference of the District Court. The 
Court has the authority to enter a final order 
pursuant to 28 U.S.C. § 157(b)(2). For the 
reasons indicated below, the Motion for 
Summary Judgment is due to be GRANTED and 
judgment should be entered accordingly.
FACTS
        The pertinent facts are undisputed. Plaintiff 
Elizabeth Katherine Loving filed her underlying 
Chapter 7 bankruptcy case on April 8, 2011. 
Plaintiff's 2007 Federal income tax return was 
due April 15, 2008. Plaintiff filed her 2007 
Federal income tax return on February 19,
Page 2
2008. Further, the Court takes judicial notice 
that April 15, 2008 through April 15, 2011 is a 
three year period, and that April 15, 2008 to 
April 8, 2011 is a period of less than three years.
        On June 15, 2011, Plaintiff filed the 
underlying adversary proceeding asking this 
Court to  determine  the  dischargeability  of  her 
2007 Federal income tax obligation. In that 
complaint, Plaintiff argued that 11 U.S.C. § 
523(a)(1) does not bar the dischargeability of her 
2007 Federal income tax debt. The United States 
answered Plaintiff's complaint on July 15, 2011 
and asserted as an affirmative defense that 
Plaintiff's 2007 tax debt was excepted from 
discharge because it was due within three years 
prior to Plaintiff's petition date.
        On July 22, 2011, the United States filed 
this Motion for Summary Judgment restating the 
argument set forth in its answer that Plaintiff's 
2007 tax debt is nondischargeable. Plaintiff filed 
a response to the United States' Motion for 
Summary Judgment on August 16, 2011. In that 
response, Plaintiff asserted that she filed her tax 
return on February 19, 2008, a date that is more 
than three years prior to her bankruptcy filing. 
Also, she alleged that her 2007 taxes were 
assessed more than three years prior to her 
bankruptcy filing.
LAW
        A motion for summary judgment is 
controlled by Rule 56 of the Federal Rules of 
Civil Procedure, which is applicable to 
bankruptcy proceedings pursuant to Rule 7056 
of the Federal Rules of Bankruptcy Procedure. A 
court shall grant summary judgment to a moving 
party when the movant shows that "there is no 
genuine issue as to any material facts and . . . the 
moving party is entitled to judgment as a matter 
of law." Fed. R. Bankr. P. 7056(c). In Anderson 
v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 
2502, 91 L.Ed. 2d 2020 (1986),  the  Supreme 
Court found that a judge's function is not to 
determine the truth of the matter asserted or 
weight of the evidence presented, but to
determine whether or not the factual disputes 
raise genuine issues for
Page 3
trial. Anderson, 477 U.S. at 249-50. In making 
this determination, the facts are to be looked 
upon in the light most favorable to the 
nonmoving party. Id.; Celotex Corp. v. Catrett, 
477 U.S. 317, 323, 106 S. Ct. 2548, 91 L.Ed. 2d 
265 (1986); Allen v. Bd. Of Public Educ. for 
Bibb County,  495 F.3d 1306 (11th Cir. 2007). 
The moving party bears the burden of proving 
there is no issue as to any material fact and that 
judgment should be entered as a matter of law. 
Fed. R. Bankr. Pro. 7056(c).
        In this case, the material facts are 
undisputed and the issue presented is purely a 
matter of law. This Court must decide whether 
Plaintiff's 2007 Federal income tax obligations 
are dischargeable pursuant to 11 U.S.C. § 
523(a)(1)(A). The United States, as the moving 
party, bears the burden of proof  by a 
preponderance of the evidence. In re Fretz, 24,4 
F.3d 1323 (11th Cir. 2001).
        Section 523(a)(1)(A) of the Bankruptcy 
Code deems priority taxes, as defined in 11 
U.S.C. § 507(a)(8), nondischargeable. In re 
Morgan, 18,2 F.3d 775 (11th Cir. 1999).
Pursuant to § 507(a)(8)(A)(i) and (ii), a tax is a 
priority tax where it is a "tax on or measured by 
income or gross receipts for a taxable year 
ending on or before the date of the filing of the 
petition" and (1) "a return, if required, is last 
due, including extensions, after three years 
before the date of the filing of the petition," or 
(2) is "assessed within 240 days before the date 
of the [bankruptcy] filing." The Court will 
address each prong separately and then address 
some additional considerations.
        (1) 11 U.S.C. § 507(a)(8)(A)(i)
Under § 507(a)(8)(A)(i), "an individual 
debtor's debt to a governmental unit for an 
income tax is excepted from discharge if it 
pertains to a taxable year the return due date of 
which is three years or less  before  the  date  the 
debtor filed a bankruptcy petition." In re 
Jackson, 253
Page 4
B.R. 570, 573 (M.D. Ala. 2000). Thus, the 
proper measuring dates for § 507(a)(8)(A)(i) are 
the due date of the tax return in question and the 
date the bankruptcy petition was filed.
        As an example, in In re Newman, 39,9 B.R. 
541 (Bankr. M.D. Fla. 2008), the debtor filed 
bankruptcy on July 13, 1998. On that day, the 
debtor owed income tax for the taxable years 
1995 and 1996. The income tax returns for those 
two tax years were due on April 15, 1996 and 
April 15, 1997, respectively. The bankruptcy 
court held, in part, that the debtor's income tax 
obligations from 1996 and 1997 were 
nondischargeable because they "were last due 
within three years of the filing of Debtor's 
bankruptcy petition." Id.
        Here, Plaintiff's 2007 tax obligation is a 
priority tax pursuant to § 507(a)(8)(A)(i). First, § 
507(a)(8)(A)(i) applies to Plaintiff's 2007 tax 
debt because it is an income tax debt for a 
taxable year that ended before Plaintiff filed her 
petition on April 8, 2011. Second, Plaintiff's 
2007 tax return was due on April 15, 2008, a 
date within three years of Plaintiff's bankruptcy 
petition date of April 8, 2011. As a priority tax, 
Plaintiff's 2007 tax obligation is 
nondischargeable pursuant to § 523(a)(1)(A).
        (2) 11 U.S.C. § 507(a)(8)(A)(ii)
"[A]n individual debtor's debt for an 
income tax liability that was assessed within 240 
days of the bankruptcy petition is . . . excepted 
from discharge." In re Parker, 19,9  B.R. 792 
(Bankr. M.D. Fla. 1996). Thus, the pertinent 
measuring date for § 507(a)(8)(A)(ii) is the date 
of assessment. The Bankruptcy Code does not 
define assessment; however, "courts have almost 
unanimously adopted the Internal Revenue Code 
definition." 4  Collier  on  Bankruptcy  ¶ 
507.11[2][b][i] (16th ed. 2009). Under the 
Internal Revenue Code, the Secretary of 
Treasury makes tax assessments. 26 U.S.C. § 
6201(a). Procedurally, the Secretary of Treasury 
must first
Page 5
send a taxpayer a notice of deficiency and wait a 
statutorily determined period of time before 
making the assessment. 26 U.S.C. § 6201(a) and 
§ 6212(a).
        In the instant case, § 507(a)(8)(A)(ii) does 
not apply. The facts in this case are undisputed 
and no evidence has been presented to the Court, 
nor has any argument been made by either party, 
that Plaintiff ever received a notice of deficiency 
from the Secretary of Treasury. Thus, this Court 
possesses no evidence showing that an 
assessment occurred pursuant to the Internal 
Revenue Service definition. Nonetheless, as 
discussed above, Plaintiff's 2007 income tax 
debt is nondischargeable pursuant to § 
507(a)(8)(A)(i).
        (3) Additional Considerations
Plaintiff cites In re Gore, 18,2 B.R. 293 
(Bankr. N.D. Ala. 1995), in opposition to the 
United States' motion for summary judgment. 
The issue and decision in In re Gore have no 
bearing on the instant case. In In re Gore, the 
bankruptcy court focused squarely on whether 
the three year period detailed in § 
507(a)(7)(A)(i), a previous  version of § 
507(a)(8)(A)(i), was tolled by a debtor's prior 
bankruptcy filings. The language cited by 
Plaintiff speaks specifically to that issue and is 
inapplicable to these proceedings.
        Plaintiff also asks this Court to utilize the 
equitable powers contained in 11 U.S.C. § 
105(a) to rule in her favor. Section 105 of the 
Bankruptcy Code gives a bankruptcy judge 
discretion to "issue any order, process, or 
judgment that is necessary or appropriate to 
carry out the provisions of this title." However,
"this Court does not have a 'roving commission 
to do equity.'" In re Parker, 27,9 B.R. 596 
(Bankr. S.D. Ala. 2002) (quoting language from 
Chiasson v. J. Louis Matherne & Assocs., 4 F.3d 
1329, 1334 (5th Cir. 1993)). This Court is
Page 6
bound to apply the law as it is written and fails 
to find sufficient justification in the facts of this 
case to contravene the proper operation of § 
523(a)(1)(A) and § 507(a)(8)(A)(i).
        Therefore, it is ORDERED that:
1. The United States' Motion for Summary 
Judgment is GRANTED;
2. Judgment shall be awarded to the United 
States against the Plaintiff Elizabeth Katherine 
Loving as to the nondischargeability of 
Plaintiff's 2007 Federal income tax debt.
        MARGARET A. MAHONEY
CHIEF U.S. BANKRUPTCY JUDGE
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