Opinion
22157-13
09-11-2024
DONALD BUSH & KIMBERLY A. BUSH, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Peter J. Panuthos Special Trial Judge
On September 23, 2013, petitioners timely filed the Petition in this case, disputing deficiencies, civil fraud penalties, and accuracy-related penalties under section 6662 for taxable years 2009, 2010, and 2011. Pending in this case is respondent's Motion to Lift Stay of Proceedings, filed May 31, 2024.
Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C, in effect at all relevant times.
On September 30, 2014, petitioners (sometimes hereinafter referred to as debtors) filed for bankruptcy under Chapter 13 with the United States Bankruptcy Court for the Southern District of Indiana. Also on September 30, 2014, the Court issued an Order staying all proceedings under 11 U.S.C. § 362(a)(8). On October 16, 2014, the Bankruptcy Court granted the debtors' Motion to Convert, converting the bankruptcy case to Chapter 7.
On December 28, 2014, the debtors filed a Motion to Determine Tax Liability, pursuant to 11 U.S.C. § 505 in Bankruptcy Court. On March 16, 2015, the Bankruptcy Court granted the debtors a discharge; thereafter, this Court lifted the stay of proceedings in this case. On May 19, 2015, the United States responded to the debtors' 11 U.S.C. § 505 Motion in the Bankruptcy Court, asking the Bankruptcy Court to dismiss the motion for lack of jurisdiction or, alternatively, that the Bankruptcy Court abstain from deciding the tax issue in favor of allowing the case to proceed before the Tax Court. On July 7, 2015, the Bankruptcy Court granted the debtors' Motion to Determine Tax Liability to the extent the Bankruptcy Court agreed to determine the amount of the tax and penalties that are the subject of the motion. In re Bush, 2015 WL 12516006 (Bankr. S.D. Ind. July 7, 2015).
On July 21, 2015, the United States filed a motion in the Bankruptcy Court, seeking reconsideration of the Bankruptcy Court's Order dated July 7, 2015. On August 14, 2015, the Bankruptcy Court denied the United States' Motion to Reconsider. In re Bush, 2015 WL 12516007 (Bankr. S.D. Ind. Aug. 14, 2015).
Thereafter, the United States filed an interlocutory appeal to the U.S. District Court for the Southern District of Indiana. On August 12, 2016, the District Court reversed the Bankruptcy Court, holding that an impact on the estate was necessary for jurisdiction and that there would be no such impact. United States v. Bush, 2016 WL 6818517 (S.D. Ind. 2016). The District Court did not address the issue of abstention.
On August 22, 2016, petitioners appealed the District Court's decision to the U.S. Court of Appeals for the Seventh Circuit. Also on August 22, 2016, petitioners filed a Motion to Stay Proceedings in this proceeding which was granted by Order dated September 9, 2016. On September 20, 2019, the Seventh Circuit vacated the District Court's decision and remanded the case, directing the District Court to remand to the Bankruptcy Court with instructions for the entry of an order under 28 U.S.C. § 1334(c)(1), which would mark the final step in the Bushes' bankruptcy proceedings. Bush v. United States, 939 F.3d 839 (7th Cir. 2019).
In response to the Seventh Circuit's opinion, all parties petitioned for rehearing and rehearing en banc. Bush v. United States, 100 F.4th 807, 809 (7th Cir. 2024). On April 29, 2024, the Seventh Circuit issued an opinion concluding that further proceedings were necessary to determine whether: (1) on the date that petitioners asked the Bankruptcy Court to determine their tax liabilities, a decision could have affected the allocation of assets among the creditors with outstanding claims; and (2) if so, should the Bankruptcy Court nonetheless abstain in favor of the Tax Court. Id. at 813-14. The Seventh Circuit noted that the right forum for the decision on whether to abstain is the District Court, because 28 U.S.C. § 1334 gives the District Court the power to relinquish jurisdiction and provides that its decision "is not reviewable by appeal or otherwise by the Court of Appeals." Id. at 814. The District Court's decision was vacated, and the case was remanded with instructions for the District Court.
In his present motion pending before the Tax Court, respondent argues that the stay should be lifted because: (1) while the Bankruptcy Court's jurisdiction is not settled, the Tax Court has jurisdiction; and (2) the Tax Court should proceed in the interest of judicial economy, because a Tax Court decision would moot all related proceedings in other courts.
The District Court is positioned to rule on the issues which necessitated the initial placing of the stay. Given the complex circumstances and in particular the fact that the District Court has not yet ruled on the remand as directed by the Seventh Circuit, it appears appropriate to await a ruling by the District Court.
It is therefore
ORDERED that respondent's Motion to Lift Stay of Proceedings, filed May 31, 2024, is denied without prejudice.