Smith v. IRS, No. 14-15857 (9th Cir. 2016)
Annotate this CasePlaintiff failed to timely file his 2001 tax forms and filed a Form 1040 seven years after it was due, and three years after the IRS assessed a deficiency against him. Plaintiff later filed for bankruptcy and sought to discharge his 2001 tax liability. The bankruptcy court permitted the discharge, but the district court reversed. In In re Hatton, the court adopted the Tax Court’s widely-accepted definition of “return.” The court held that plaintiff's tax liabilities are nondischargeable under 11 U.S.C. 523(a)(1)(B)(i). The court also held that Hatton applies to the bankruptcy code as amended, and that plaintiff’s tax filing, made seven years late and three years after the IRS assessed a deficiency against him, was not an “honest and reasonable” attempt to comply with the tax code. Accordingly, the court affirmed the district court's judgment.
Court Description: Bankruptcy. The panel affirmed the district court’s order reversing the bankruptcy court and entering summary judgment in favor of the IRS in a debtor’s adversary proceeding seeking a determination that his federal income tax liabilities were dischargeable in bankruptcy. The panel held that the debtor’s tax liabilities were non- dischargeable under 11 U.S.C. § 523(a)(1)(B)(i), which exempts from discharge any debt for a tax with respect to which a return was not filed. The panel held that the debtor’s late-filed Form 1040 did not represent an honest and reasonable attempt to satisfy the requirements of the tax law, and he therefore did not file a “return” within the meaning of § 523(a)(1)(B)(i). Agreeing with other circuits, the panel held that In re Hatton, 220 F.3d 1070 (9th Cir. 2000), which adopted the Tax Court’s widely-accepted definition of “return,” applied to the bankruptcy code as since amended.
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