Opinion
No. BK-S-88-1220-LRB
June 6, 1991
Robert C. LePome, Las Vegas, Nevada.
J. Scott Moede, Trial Attorney, Tax Division, U.S. Department of Justice, Washington, D.C.
Discharge — Taxes — Filing — Failure to File. — A dummy tax return did not constitute a return for purposes of Section 523(a)(B)(i). The filing of a Form 843 and Form W-2 did not constitute the filing of a return since a debtor had no intention that these documents would constitute a return. The debtor never filed a Form 1040 for the year in question. The court reached this holding even though the Forms 843 and W-2 contained sufficient information from which the debtor's taxes could have been computed.
See Sec. 523(a) at ¶ 9227.
FACTS
The following facts were stipulated to by the parties. The debtor never personally filed a Form 1040 for the tax year 1981. The official records of the IRS for that year show an income tax return Form 1040 was partially filled in by the IRS showing debtor's name, address, social security number, filing status and exemptions. In June, 1982, the debtor submitted Form 843 with Form W-2 attached thereto to the IRS. On August 16, 1982, the IRS responded to the debtor's Form 843, stating that the debtor's claim was rejected because the debtor had not filed a Form 1040. Taxes were assessed on September 10, 1984 following the issuance of a Notice of Deficiency dated April 13, 1984 and were based on an Examination Report, Form 1902-B. The IRS issued a Notice of Levy to debtor's employer on July 9, 1985. The amount claimed as due and owing by the IRS for the 1981 federal tax liability as of February 20, 1990 is $29,315.84, plus accrued interest as provided by law.
The debtor filed his chapter 7 bankruptcy proceeding on April 28, 1988, and brought this adversary proceeding seeking to have this 1981 federal tax liability discharged. The Internal Revenue Service objected to the discharge on the grounds that the debtor had failed to file a return pursuant to 11 U.S.C. § 523 (a)(1)(B)(i).
ISSUES
Whether a "dummy" return compiled by the IRS can constitute a "return" for purposes of 11 U.S.C. § 523.
Whether a Form 843 and attached Form W-2 constitute a "return" for purposes of 11 U.S.C. § 523.
DISCUSSION
Pursuant to § 523(a)(1)(B)(i) of the Bankruptcy Code, "A discharge . . . does not discharge an individual debtor from any debt — for a tax or a customs duty — with respect to which a return, if required-was not filed." 11 U S.C § 523(a)(1)(B)(i).
The Internal Revenue Code (IRC) authorizes the IRS to compile a return, which has the effect of a return filed by the taxpayer. 26 U.S.C. § 6020(b).
In order for a document compiled by the IRS to constitute a "return" it must be signed by the Secretary. Only then is such a return prima facie good and sufficient for all legal purposes. Id. Moreover, this Court agrees with cases such as Hoffman v. United States (In re Hoffman), 76 B.R. 853 (Bankr. S.D. Fla 1987), and holds that so called "dummy" returns are not returns within the meaning of 11 U.S.C. § 523(a)(1)(B)(i).
Nor is such a document a "return" commencing the statute of limitations, 26 U.S.C. § 6501(b)(3), so as to discharge taxes pursuant to 11 U.S.C. § 523(a)(1)(B)(ii).
The issue therefore becomes whether or not the documents the debtor filed constitute a return.
Early on the United States Supreme Court enunciated that a document is a return: "[I]f it (the document) purports to be a return, is sworn to as such, . . . and evinces an honest and genuine endeavor to satisfy the law." Zellerbach Paper Co. v. Helvering, 293 U.S. 172, 55 S.Ct. 127 (1934). See also Germantown Trust Co. v. Comm'r of Internal Revenue, 309 U.S. 304 (1940); Florsheim Bros. Drygoods Co. v. United States, 280 U.S. 453 (1930).
The test in the Ninth Circuit for whether or not the information filed with the IRS constitutes a return was enunciated in a series of cases including United States v. Klee, 494 F.2d 394 (9th Cir. 1974). A document which "does not contain any information relating to the taxpayer's income from which the tax can be computed is not a return within the meaning of the Internal Revenue Code or the regulations adopted by the Commissioner." 494 F.2d at 397.
Conversely, documents containing "sufficient" information are considered returns.
Even though a document is not in the form prescribed for use as the appropriate return, it may constitute a return if it discloses the data from which the tax can be computed, is executed by the taxpayer, and is lodged with the Internal Revenue Service (see Germantown Trust Co. v. Commissioner, 309 U.S. 304 (1940), 1040-1 C.B. 178.
Revenue Ruling 74-203.
For example, zeroes entered on a Form 1040 constitute a return, United States v. Long, 618 F.2d 74, 76 (9th Cir. 1980), but asterisks do not, United States v. Kimball, 925 F.2d 356, 358 (9th Cir. 1991). In making this admittedly "formalistic" distinction, the Ninth Circuit noted as follows:
The zeros entered on Long's tax forms constitute "information relating to the taxpayer's income from which the tax can be computed." The I.R.S. could calculate assessments from Long's strings of zeros, just as it could if Long had entered other numbers. The resulting assessments might not reflect Long's actual tax liability, but some computation was possible.
Long, 681 F.2d at 75, quoting Klee, 494 F.2d at 397. Long properly turns on the presence or absence of financial information, in keeping with Klee. "Nothing can be calculated from a blank, but a zero, like other figures, has significance. A return containing false or misleading figures is still a return." Id. at 76. Here, as with Long's hypothetical blank form, nothing can be calculated from Kimball's asterisks. A proper reading of Long demonstrates that Kimball did not file a return.
Kimball, 925 F.2d at 358.
In United States v. Crowhurst, 629 F.2d 1297 (9th Cir. 1980), the court held that a signed but otherwise blank Form 1040 with a Form W-2 attached was sufficient to constitute a return so as to support a conviction for making a false return under 26 U.S.C. § 7203.
Here, a Form W-2 was attached to a signed Form 843, a claim form. While under Crowhurst it would appear these documents contain information from which a tax may be computed, the requisite intent to have the documents constitute a return is lacking. This intent is present in Crowhurst as a 1040 was filed by the taxpayer, indicating his intent to comply, (albeit by the use of falsehoods), with the Internal Revenue Code.
Similarly, the taxpayer in Carapella v. United States (In re Carapella,) 84 B.R. 779 (Bankr. M.D. Fla 1988), evinced an intent to comply with the tax code requirements by filing a Form 870, which by its very nature submits the taxpayer to the provisions of the IRC.
Neither Carapella, Crowhurst or Revenue Ruling 74-203 detract from this Court's holding today as intent was not addressed, and it is admitted that this debtor had no intent to file a return, see Exhibit 1 to Debtor's Supplemental Memorandum of Points and Authorities.
Finally, this Court recognizes that the Ninth Circuit has been silent on the intent aspect of the Zellerbach test, cf. United States v. Moore, 627 F.2d 830, 835 (7th Cir. 1980), but it believes that that element cannot be overlooked in the context of determining dischargeability of a tax debt. See Pruitt v. the United States (in re Pruitt), 107 B.R. 764, 766 (Bankr. D. Wyoming, 1983).
CONCLUSION
The dummy return did not constitute a return for purposes of 11 U.S.C. § 523(a)(1)(B)(i).
The filing of the Form 843 and Form 4-2 does not constitute the filing of a return as the debtor had no intention that these documents constitute a return, even though they might contain sufficient information from which his tax could have been computed.
The attorneys for the United States are hereby ordered to prepare the appropriate Judgment.
IT IS SO ORDERED.