Opinion
5477-14
11-05-2021
Donald D. Bailey and Sandra M. Baily, Petitioner v. Commissioner of Internal Revenue, Respondent
ORDER AND DECISION
Cary Douglas Pugh Judge
On May 10, 2021, the Court issued its Memorandum Opinion (T.C. Memo. 2021-55) in this case. On August 6, 2021, respondent filed a computation for entry of decision under Rule 155. On September 17, 2021, the Court received and filed petitioners' response and a letter dated August 9, 2021, sent to respondent, that the Court filed as a supplement to petitioners' response. We then ordered respondent to reply to petitioners' response, which we received timely on October 29, 2021.
This case and the case at Docket No. 9393-15 were consolidated for purposes of trial, briefing, and opinion.
Unless otherwise indicated, all section references are to the Internal Revenue Code of 1986, as amended and in effect for the relevant years. Rule references are to the Tax Rules of Practice and Procedure.
In their response petitioners argue that the taxes, penalties and interest at issue in this case were discharged in bankruptcy. Their response and letter notified the Court and respondent, respectively, for the first time, that they had filed two voluntary Chapter 7 bankruptcy petitions in the U.S. Bankruptcy Court of the District of Arizona (Tucson). Both bankruptcy proceedings were filed after petitioners' case before us was tried and both were concluded before we issued our memorandum opinion: the first was filed on July 7, 2020, and was dismissed on August 13, 2020, and the second was filed on August 31, 2020, and was discharged, under 11 U.S.C. section 727, by order dated December 22, 2020.
Petitioners are mistaken about the effect of the bankruptcy court's December 22, 2020, order on their tax deficiencies. While their bankruptcy cases would have required us to stay our proceedings while the bankruptcy cases were pending, stay is not required now because those bankruptcy cases have been concluded and we therefore may enter our order and decision. See, e.g., Neilson v. Commissioner, 94 T.C. 1, 9 (1990); Ashmore v. Commissioner, T.C. Memo. 2016-36. Respondent did not file a proof of claim in petitioners' bankruptcy proceedings and petitioners' tax deficiencies were not adjudicated in the bankruptcy court under 11 U.S.C. section 505(a)(1). Therefore, the bankruptcy court's order has no binding effect in the Tax Court. And we lack jurisdiction to consider whether the bankruptcy court's order discharged their taxes, penalty and interest. See, e.g., Neilson v. Commissioner, supra, Ashmore v. Commissioner, supra.
Petitioners have identified no errors in respondent's computations and has raised no other challenges. Upon due consideration, and for cause, it is therefore ORDERED: That respondent's computations are incorporated as the findings of the Court. It is further
ORDERED AND DECIDED: That there are deficiencies in income tax due from petitioners for taxable years 2008, 2009, and 2010 in the amounts of $8,644.00, $28,513.00, $37,482.00, respectively. It is further
ORDERED AND DECIDED: That there are additions to tax under the provisions of section 6651(a)(1) due from petitioners for taxable years 2009 and 2010 in the amounts of $7,086.25 and $4,133.67, respectively. It is further
ORDERED AND DECIDED: That there are additions to tax under the provisions of section 6651(a)(2) due from petitioners for taxable year 2010 in the amount of $1,060.74. It is further
ORDERED AND DECIDED: That there are penalties under the provisions of section 6662(a) due from petitioners for taxable years 2008, 2009, and 2010 in the amounts of $1,728.80, $5,702.60, $7,496.40, respectively.