482 B.R. 1
D. Mass.2012Background
- Daniels is a debtor and former practitioner who maintained a Profit Sharing Plan managed solely by him, with various related transactions involving family and associates.
- IRS issued a February 19, 2009 letter regarding the plan that Daniels contends was a favorable determination, but the court held it was not a favorable determination under 26 U.S.C. § 7803.
- Two IRAs were funded in February 2007 entirely from funds transferred from the Profit Sharing Plan, and Daniels did not disclose these IRAs in his bankruptcy schedules.
- The bankruptcy court granted turnover and injunctive relief to the Trustee, and later Daniels moved for partial relief, discovery relief, and reconsideration responses were denied.
- Daniels filed appeals challenging the turnover ruling, Rule 60(b) relief denial, and later the revocation of his discharge, all consolidated in this district court.
- The court ultimately affirmed the bankruptcy court’s rulings, including denial of exemptions for the Profit Sharing Plan and IRAs, denial of Rule 60(b) relief, and revocation of Daniels’s discharge.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Profit Sharing Plan is exempt | Daniels argues the plan is exempt due to an IRS determination. | Trustee/Harrington contends there was no favorable IRS determination and no exemption. | Plan not exempt |
| Whether the IRAs funded from the Plan are exempt | Daniels claims IRAs may be exempt as retirement funds. | IRAs funded from nonexempt funds are not exempt and nondisclosure bars exemption. | IRAs not exempt; nondisclosure barred exemption |
| Whether Daniels disclosed and concealed assets in his schedules | Daniels attributes nondisclosure to counsel’s error and excusable neglect. | Trustee argues there was a deliberate pattern of concealment and not mere error. | Nondisclosure/concealment found; bad faith established |
| Whether Rule 60(b) relief from turnover order was proper | Daniels sought relief alleging excusable neglect and newly discovered evidence. | Bankruptcy court found no extraordinary circumstances or merit for relief. | Rule 60(b) relief denied |
| Whether the discharge could be revoked | Daniels denies fraudulent intent and challenges the basis for revocation. | Court relied on prior findings of nondisclosure/concealment and intent to defraud. | Discharge revoked |
Key Cases Cited
- In re Tully, 818 F.2d 106 (1st Cir.1987) (reckless indifference to the truth supports denial of discharge)
- In re Wood, 291 B.R. 219 (1st Cir. BAP 2003) (intentional concealment bars exemption even if exempt otherwise)
- Ruiz Rivera v. Pfizer Pharm., LLC, 521 F.3d 76 (1st Cir.2008) (standard for abuse of discretion in Rule 60(b) context)
- In re Harris, 385 B.R. 802 (1st Cir. BAP 2008) (omissions in disclosures prejudice the estate)
- Dickow v. United States, 654 F.3d 144 (1st Cir.2011) (IRS manual lacks force of law; not substantive rights)