Deangelis v. Von Kiel (In Re Von Kiel)
461 B.R. 323
Bankr. E.D. Pa.2012Background
- Debtor earned over $150,000 annually but declined to take it, assigning it to a religious organization that gifts back a portion.
- He maintained a vow of poverty through IAL and claimed all income/assets were church property to avoid taxes and creditors.
- Debtor used multiple tax IDs, opened accounts in the names of third parties, and controlled funds via TLM accounts to shield assets.
- PrimeCare paid Debtor salary and benefits, but Debtor reported zero income from PrimeCare on schedules and tax filings.
- Garnishment efforts by the United States led Debtor to route income through IAL and TLM, with Second SSN and other IDs masking income sources.
- UST filed an adversary to deny Debtor’s discharge under 727(a)(2), (3), and (4) based on concealment, lack of records, and false oaths.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Debtor’s actions constitute a fraudulent tax-evading scheme | UST contends Debtor’s vow of poverty and assignment of income to IAL/Trusts was a sham. | Von Kiel argues the income is church property and lawful under his religious vocation. | Yes; the court finds a fraudulent scheme to evade taxes and creditors. |
| Whether Debtor failed to keep and preserve adequate records under § 727(a)(3) | UST shows Debtor did not maintain records identifying sources/uses of funds. | Von Kiel claims he relied on church officials and did not keep records due to ministry. | Yes; discharge denied for failure to maintain adequate records. |
| Whether Debtor transferred or concealed assets to hinder creditors under § 727(a)(2)(A) | UST proves ongoing transfers of income to IAL/TLM and use of multiple IDs to shield assets. | Von Kiel maintains transfers were part of religious obligations and not to hinder creditors. | Yes; discharge denied for intent to hinder, delay, or defraud creditors. |
| Whether Debtor made false oaths or accounts under § 727(a)(4) | UST demonstrates false disclosures about PrimeCare income and IAL gifts on SOFA/Schedules. | Von Kiel argues misunderstandings and reliance on others. | Yes; discharge denied for willful false oaths/statements. |
Key Cases Cited
- Page v. Comm'r, 823 F.2d 1263 (8th Cir. 1987) (income belonging to the religious order when earnings are assigned to it may be taxed)
- Fogarty v. United States, 780 F.2d 1005 (Fed.Cir. 1986) (vows of poverty do not automatically shield income from taxation)
- Pollard v. Comm'r, 786 F.2d 1063 (11th Cir. 1986) (sham vows of poverty used to evade tax liabilities fail)
- Mone v. Comm'r, 774 F.2d 570 (2d Cir. 1985) (courts reject efforts to shield income via religious orders)
- In re Mezvinsky, 265 B.R. 681 (Bankr.E.D.Pa. 2001) (disclosure as prerequisite to discharge; intent not required for § 727(a)(3))
- In re Jackson, 453 B.R. 789 (Bankr.E.D.Pa. 2011) (records must be adequate to identify transactions for financial condition)
- In re Kaiser, 722 F.2d 1574 (2d Cir. 1983) (badges of fraud considered in § 727(a)(2) determinations)
- Juzwiak, 89 F.3d 424 (7th Cir. 1996) (test for information available to determine debtor's financial condition)