Opinion
13958-20
12-20-2023
DOUGLAS A. LARSON, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Adam B. Landy Special Trial Judge
This deficiency case is before the Court on the parties' Joint Motion to Vacate (the "Motion to Vacate"), filed May 22, 2023. The parties seek an order from the Court vacating our Order served November 3, 2022, granting the Commissioner's Motion to Dismiss for Lack of Jurisdiction as to taxable year 2016, pursuant to Rule 162. In dismissing this case as to taxable year 2016, the Court determined that the Petition was filed in violation of the automatic stay imposed under 11 U.S.C. section 362(a)(8). For the reasons stated below, we seek additional arguments from the parties regarding Rule 123(c) and this Court setting aside a dismissal order.
Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C, in effect at all relevant times, and Rule references are to the Tax Court Rules of Practice and Procedure.
On December 7, 2020, Mr. Larson filed a Petition to contest the Notice of Deficiency dated September 2, 2020, for taxable years 2016 and 2017. Mr. Larson resided in Illinois at the time the Petition was filed. On February 4, 2022, the Commissioner filed a Motion to Dismiss for Lack of Jurisdiction (the "Motion to Dismiss") seeking to dismiss this case as to taxable year 2016 because the Petition was filed in violation of the automatic stay imposed pursuant to 11 U.S.C. section 362(a)(8) and section 6213(f). Although the Court directed Mr. Larson to file an objection, if any, to the Commissioner's Motion to Dismiss, he failed to do so. By Order served November 3, 2022, the Court granted the Commissioner's Motion to Dismiss.
On May 12, 2023, the parties filed a Joint Motion for Leave to File a Joint Motion to Vacate Order Granting Respondent's Motion to Dismiss for Lack of Jurisdiction as to the Taxable Year 2016, on the ground that the Petition was not filed when the automatic stay was in effect for taxable year 2016, which is not in violation of 11 U.S.C. section 362(a)(8). In the bankruptcy proceedings on May 1, 2019, Mr. Larson filed a voluntary waiver of his Chapter 7 discharge pursuant to 11 U.S.C. section 727(a)(1) which the bankruptcy court approved on May 3, 2019.
In paragraph seven (7) of the Motion to Vacate, the parties state:
A request for direction from an Internal Revenue Service bankruptcy coordinator regarding the notice of deficiency issued to [Mr. Larson] and whether the automatic stay provisions of 11 U.S.C. section 362(a)(3) remained in effect caused [the Commissioner's] counsel to revisit the bankruptcy case. During a review of the filings by [Mr. Larson] in his bankruptcy case, [the Commissioner] discovered that [Mr. Larson] on May 1, 2019, had waived his Chapter 7 discharge pursuant to 11 U.S.C. section 727(a)(10) and the bankruptcy court had approved the waiver by order dated May 3, 2019. (Doc. 30, p. 2-3).
The parties now agree that the automatic stay terminated on May 3, 2019, pursuant to 11 U.S.C. section 362(c)(2), and was not in effect at the time Mr. Larson filed his Petition. Consequently, the parties contend that Mr. Larson filed a timely Petition to dispute the deficiencies for the taxable years at issue. On May 22, 2023, the Court granted the Motion for Leave to File a Motion to Vacate, and same day, the Court filed the parties' Joint Motion to Vacate lodged with the motion for leave.
The automatic stay is lifted upon the earliest of (1) the date the bankruptcy case is closed, (2) the date the bankruptcy case is dismissed, or (3) the date a bankruptcy discharge is granted or denied. 11 U.S.C. section 362(c)(2); see also Drake v. Commissioner, 123 T.C. 320, 324 (2004).
Rule 123(c) provides the means for setting aside a dismissal. Because we dismissed this case, we will treat the Motion to Vacate as a motion made pursuant to Rule 123(c) for the Court to set aside a dismissal. See Ward v. Commissioner, 92 T.C. 949, 951-52 (1989), rev'd on other grounds, 907 F.2d 517 (5th Cir. 1990). The rule states that "[f]or reasons deemed sufficient by the Court and upon motion expeditiously made, the Court may set aside a default or dismissal, or the decision rendered thereon." (emphasis added). Granting a motion under 123(c) is within the sound discretion of the Court. Kraasch v. Commissioner, 70 T.C. 623, 626 (1978).
The Motion to Vacate was filed 190 days after entry of the order dismissing this case as it relates to taxable year 2016 only. The Court therefore desires the parties' views whether the Motion to Vacate was expeditiously made. In responding to this inquiry, the Court desires more information as to (1) the nature of the contact by the bankruptcy coordinator, (2) the exact date or time period when contact with the bankruptcy coordinator was made, (3) when the Commissioner's counsel became aware that Mr. Larson filed the Debtor's Waiver of Discharge Pursuant to 11 U.S.C. section 727(a)(10) on May 1, 2019, and thereafter, the U.S. Bankruptcy Court for the Eastern District of Wisconsin granting such motion, and (4) the nature of the delay in filing the Motion to Vacate 190 days after the order dismissing taxable year 2016 was entered and served upon the parties.
Absent stipulation to the contrary this case is appealable to the U.S. Court of Appeals for the Seventh Circuit. See § 7482(b)(1)(A). The Court desires the parties' views as to what factors we should consider in determining whether to set aside the dismissal order under the Seventh Circuit and this Court's jurisprudence, and in doing so, the parties shall apply the relevant factors to facts of this case.
The premises considered, it is
ORDERED that, on or before January 19, 2024, the parties shall each file separate written reports with the Court addressing each of the statements made by the Court in the last two (2) paragraphs above regarding the pending Motion to Vacate.