Answers to Frequently Asked Questions for Individuals of the Same Sex Who Are Married Under State Law
(In re: Dawn Bryan, Debtor(s).)
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
A.P. No. 13-1151
MEMORANDUM ON MOTION FOR SUMMARY JUDGMENT
“Before her Chapter 7 bankruptcy in 2010, debtor Dawn Bryan took a first time home buyer tax credit pursuant to the Housing Recovery Act of 2008 (HERA). The provisions of HERA include a tax credit for first time home buyers. However, the law requires the taxpayer to repay the credit over time. In the years after her bankruptcy, the Internal Revenue Service has reduced the amount of her tax refund by her repayment obligation. In this adversary proceeding, Bryan argues that the tax credit was in essence a loan, and her obligation to repay it was discharged by her bankruptcy. She therefore argues that the reduction of her tax refunds was unlawful. The Government has moved for summary judgment.
As one commentator has noted, the first time home buyer tax credit “contains one last limitation, one that eliminates much of the benefit to taxpayers who use the credit: recapture. For the next fifteen taxable years after the taxpayer uses the [first time home buyer] credit, 6.67 percent of the amount of the credit shall be imposed as a tax on the taxpayer.”[Footnotes omitted, emphasis added]. Comment, “No Tax for ‘Phantom Income’: How Congress Failed to Encourage Responsible Housing Consumption with its Recent Tax Legislation,” 85 Chi.-Kent L. Rev. 345, 363 (2010).
The crucial fact is that Congress imposed the obligation to repay the credit as a tax. This obligation is codified in 26 U.S.C. § 36(f)(1), which provides that if a home buyer takes the first time home buyer tax credit, “the tax imposed by this chapter shall be increased by 6 2/3 percent of the amount of such credit for each taxable year in the recapture period.” Thus, while the new home buyer tax credit is “like a loan” in the sense that it has to be repaid, the obligation to repay is imposed as an increased tax rather than a general obligation. It is therefore not dischargeable pursuant to § 523(a)(1)(A) of the Bankruptcy Code.
For the foregoing reasons, the Government’s motion for summary judgment will be granted. It shall submit a form of judgment providing that Bryan take nothing by her complaint and declaring that Bryan’s obligation to repay the new home buyer tax credit is a nondischargeable tax.”
DATED: February 27, 2014
IR-2014-16, February 19, 2014
“The Internal Revenue Service today issued its annual “Dirty Dozen” list of tax scams, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud.”
1. Identity Theft
2. Telephone scams including:
- •Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
- •Scammers may be able to recite the last four digits of a victim’s Social Security Number.
- •Scammers “spoof” or imitate the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
- •Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
- •Victims hear background noise of other calls being conducted to mimic a call site.
4. False Promises of “Free Money” from Inflated Refunds
5. Return Preparer Fraud
6. Hiding Income Offshore
7. Impersonation of Charitable Organizations:
- •To help disaster victims, donate to recognized charities.
- •Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. IRS.gov has a search feature, Exempt Organizations Select Check, which allows people to find legitimate, qualified charities to which donations may be tax-deductible.
- •Don’t give out personal financial information, such as Social Security numbers or credit card and bank account numbers and passwords, to anyone who solicits a contribution from you. Scam artists may use this information to steal your identity and money.
- •Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.
8. False Income, Expenses or Exemptions
9. Frivolous Arguments
10. Falsely Claiming Zero Wages or Using False Form 1099
11. Abusive Tax Structures
12. Misuse of Trusts
Tripp Dargie et al. v. United States; No. 13-5608 (6th Cir.), Decided and Filed: February 5, 2014
“In 1993, Dr. Dargie enrolled as a student at the University of Tennessee College of Medicine (UT). In 1994, he entered into a Conditional Award Agreement (“the Agreement”) with UT and MTMC that provided that MTMC would pay Dr. Dargie’s tuition, fees, and other reasonable expenses for attending UT. After graduation and the completion of his residency, Dr. Dargie was required to repay MTMC’s grant by either (1) working as a doctor in the medically underserved community of Murfreesboro, Tennessee, for four years or (2) repaying “two (2) times the uncredited amount of all conditional award payments” he received or a lesser amount agreed to by UT. During Dr. Dargie’s time in medical school, MTMC paid UT $73,000 on Dr. Dargie’s behalf as part of the Agreement.
Dr. Dargie asserts that the $121,440 amount he sent UT in 2002 was a “damages payment” for breaching the Agreement with MTMC to work in Murfreesboro after his medical training.1 Consequently, he argues the payment was an ordinary and necessary business expense permitted under I.R.C. § 162(a) because it enabled him to pursue his for-profit medical practice in a different area of the state. The government contends that the payment to UT does not qualify as a deduction because educational expenses that allow an individual to meet the minimum requirements for practicing a given profession are personal.
In this case, Dr. Dargie does not dispute that MTMC paid for his medical education and that education enabled him to meet the prerequisites for working as a physician. Moreover, U.S. Treasury regulations specifically categorize as nondeductible “expenditures made by an individual for education which is required of him in order to meet the minimum educational requirements for qualification in his employment or other trade or business.” Treas. Reg. § 1.162-5(b)(2); see Keane v. Comm’r, 75 T.C.M. (CCH) 2046, 1998 WL 126857, at *3 (1998) (holding that “[e]ducational expenses incurred to allow [a] taxpayer to meet the minimum educational requirements for his job qualification are considered personal expenses.”); see also Taubman v. Comm’r, 60 T.C. 814, 819 (1973) (holding that law school tuition expenses are nondeductible under I.R.C. § 162 because they allow a taxpayer to qualify in a new trade or business). Dr. Dargie cites no court decision that upholds a business deduction in a circumstance similar to his”
Curtis Jay Richardson et ux. v. Commissioner; T.C. Summ. Op. 2014-9, Filed January 30, 2014
“The State of California removed petitioners’ four children from their home in 2006, and the children did not live with petitioners at any time during 2008 or 2009.
All four of the dependency exemption deductions were claimed with respect to petitioners’ biological children. Petitioners, however, have not shown that any of the children resided with them during any part of 2008 or 2009. Similarly, petitioners have not made any showing with respect to support of the children.
The Court concludes that none of petitioners’ children is a “qualifying child” as defined by section 152(c) and as a result, petitioners are not entitled to dependency exemption deductions for any of their children for 2008 or 2009.”
Release Date: 1/24/2014
From: * * *
Sent: Wednesday, September 04, 2013 1:58:11 PM
To: * * *
Cc: * * *
Subject: RE: Clarification on Joint offer filed by 2 spouses that live separately
The Centralized Offer in Compromise unit has asked below to what extent they may disclose financial information provided by one taxpayer on a joint offer to the other taxpayer who does not live in the same household. Your assumption that the Service cannot disclosure current finances is correct. Upon written request, I.R.C. 6103(e)(8) permits the Service to disclose the general nature of collection activities, including whether (1) the IRS has attempted to collect the deficiency from the other former spouse; (2) the amount, if any, collected from the other former spouse; (3) the current collection status (e.g., Taxpayer Delinquent Account (“TDA”), installment agreement, suspended); and (4) if suspended, the reason (e.g., unable to locate, hardship). I.R.C. 6103(8)(e) does not, however, authorize disclosure of personal information about a former/separated spouse, including any information about the other spouse’s employment, income, or assets. The IRM provides that it is at the taxpayer’s discretion whether to discuss their financial information and whether an amended offer should be submitted to include both RCPs. IRM 188.8.131.52. “
William L. West v. Commissioner; T.C. Memo. 2014-2, Filed January 8, 2014
“Petitioner contends that he was the victim of a theft in 2006 when Morley (former wife) used $120,000 (of petitioner’s funds) to establish UTMA (Uniform Transfer to Minors Act) and section 529 accounts rather than revocable trusts for the benefit of their children. He and Morley disagree in their testimony as to whether he so instructed her when he told her to set aside the funds for the children.
We are not persuaded that Morley’s establishment of the UTMA accounts constituted a theft, because we believe that her conduct was consistent with petitioner’s expressed intentions. Tex. Penal Code Ann. sec. 31.03(a) and (b) (West 2011 & Supp. 2012) provides that a person commits the offense of theft if that person “unlawfully appropriates property with intent to deprive the owner of property” but that “[a]ppropriation of property is unlawful if: (1) it is without the owner’s effective consent”. Because she acted with petitioner’s effective consent, there was no theft under Texas law or any other recognized definition of theft.
In any event, we do not believe that petitioner discovered a theft loss in 2006. Petitioner’s retrospective attempt in 2009 to claim for tax purposes a theft loss allegedly occurring in 2006 suggests an afterthought. His claimed suspicions in 2006 are not sufficient to establish discovery of a theft loss in 2006. Moreover, if a loss occurred, he has not shown that there was not a reasonable prospect of recovery as late as the settlement of the lawsuit in 2010.”