In re Kemendo
516 B.R. 434
Bankr. S.D. Tex.2014Background
- Debtor Kemendo filed for Chapter 13; IRS disputes dischargeability of 1995 and 1996 federal income taxes under 11 U.S.C. §§ 1328(a) and 523(a)(1)(B).
- IRS asserted taxes for 1995 ($455.86 pre-petition interest) and 1996 (post-petition interest of $15,503.06 and pre-petition interest of $6,055.26) were not discharged as of July 8, 2013.
- Tax returns for 1995 and 1996 were filed late (in 2003) after IRS assessments (1999) and after some abatement actions; IRS prepared substitutes for return in 1998.
- Chapter 13 plan confirmed February 5, 2008; Debtor discharged December 17, 2012; IRS claimed continued liability after discharge.
- IRS transcripts reflect later liability amounts, and liens were released in 2013; IRS issued Notices of Intent to Levy in 2013 for 1995 and 1996 taxes.
- Court found no genuine fact issue; IRS failed to show noncooperation by Debtor in § 6020(a) substitutes; Debtor’s discharge under § 1328(a) discharged the taxes.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 1995 and 1996 taxes are discharged under §1328(a). | Remendó argues non-discharged status due to late returns. | IRS contends §1328(a)(2) exceptions apply for late returns. | Yes; Debtor’s taxes discharged under §1328(a). |
| Whether §523(a)(1)(B) returns include §6020(a) substitutes as dischargeable. | Debtor relies on §6020(a) safe harbor. | IRS argues substitutions do not qualify as returns for discharge. | Yes; substitutes prepared with cooperation qualify as returns for dischargeability under §523(a). |
| Application of McCoy safe harbor to late-filed returns. | McCoy creates safe harbor for late-filed returns prepared with cooperation. | McCoy applies narrowly; return timing remains relevant. | Summary judgment for Debtor; §6020(a) returns dischargeable under McCoy. |
Key Cases Cited
- In re McCoy, 666 F.3d 924 (5th Cir. 2012) (safe harbor for late returns prepared with taxpayer cooperation under §6020(a) for discharge under §523(a))
- In re Fields, 926 F.2d 501 (5th Cir. 1991) (burden on IRS to prove nondischargeability; refers to §523(a))
- Beard v. Commissioner, 82 T.C. 766 (Tax Court 1984; aff'd 793 F.2d 139 (6th Cir. 1986)) (discussion of returns and dischargeability under §523(a))