T.C. Memo. 1998-321
UNITED STATES TAX COURT
ROBERT J. HOAGLUND, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 18418-97. Filed September 9, 1998.
Robert J. Hoaglund, pro se.
Margaret C. Tinagero, for respondent.
MEMORANDUM OPINION
JACOBS, Judge: This case is presently before the Court on
respondent's Motion For Judgment On The Pleadings pursuant to Rule
120.
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Respondent determined a $10,995 deficiency in petitioner's
Federal income tax for 1994, and a $2,199 accuracy-related penalty
pursuant to section 6662.
Unless indicated otherwise, all section references are to the
Internal Revenue Code for the year in issue, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
On July 14, 1998, respondent filed a Motion For Judgment On
The Pleadings pursuant to Rule 120, claiming that the undisputed
facts in the pleadings require judgment in favor of respondent as
a matter of law. On August 17, 1998, petitioner filed a Response
To Respondent's Motion For Judgment On The Pleadings.
The sole issue for decision is whether an order of the U.S.
Bankruptcy Court for the Central District of California discharged
petitioner's debt to respondent for the 10-percent additional tax
pursuant to section 72(t) on premature distributions from an
individual retirement account (IRA).
The facts set forth below are derived from the pleadings filed
by the parties.
Background
At the time the petition was filed, petitioner resided in
Thousand Oaks, California.
By a notice of deficiency dated July 7, 1997, respondent
determined various increases in petitioner's Federal income tax for
1994, including a 10-percent additional tax pursuant to section
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72(t) for premature distributions from an IRA. In a petition to
this Court filed on September 8, 1997, petitioner disputed only
respondent's attempt to collect the additional tax for premature
distributions, asserting that such debt was discharged by order of
the bankruptcy court, effective July 30, 1996.
Attached to the petition filed by petitioner was a copy of the
bankruptcy court's discharge order. The order indicates that
petitioner filed a petition with the bankruptcy court on April 24,
1996, pursuant to chapter 7 of the Bankruptcy Code (11 U.S.C.).
The order further provides that no complaint objecting to the
discharge of petitioner's debt was filed, or in the alternative
that if one was filed, it was not sustained. Consequently, the
bankruptcy court ordered the following:
1. The above-named debtor [petitioner] is released from
all dischargeable debts, except those pending complaints
which will be determined later.
2. Any judgment heretofore or hereafter obtained in any
court other than this court is null and void as a
determination of the personal liability of the debtor
[petitioner] with respect to any of the following:
(a) debts dischargeable under 11 U.S.C. Section 523;
(b) unless heretofore or hereafter determined by
order of this court to be nondischargeable, debts alleged
to be excepted from discharge under clauses (2), (4) and
(6) of 11 U.S.C. Section 523(a);
(c) debts determined by this court to be discharged.
3. All creditors whose debts are discharged by this
order and all creditors whose judgments are declared null
and void by paragraph 2 above are enjoined from
instituting or continuing any action or employing any
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process or engaging in any act to collect such debts as
personal liabilities of the above-named debtor.
The order of discharge was entered on July 30, 1996.
In answer to petitioner's petition, respondent generally
denied petitioner's allegation that the bankruptcy court had
discharged petitioner's debt for the additional tax on premature
distributions. In reply to that answer, petitioner asserted that
respondent failed to object to the discharge of petitioner's debts
after notice by the U.S. Trustee assigned to the case, and
petitioner argued that the doctrines of res judicata and collateral
estoppel prohibited respondent from attempting to collect the
additional tax on premature distributions.
Discussion
Rule 120 provides that after the pleadings in a case are
closed but within such time as not to delay the trial, a party may
move for judgment on the pleadings. The granting of a motion for
judgment on the pleadings is proper only where the pleadings do not
raise a genuine issue of material fact and the moving party is
entitled to judgment as a matter of law. Abrams v. Commissioner,
82 T.C. 403, 408 (1984); Anthony v. Commissioner, 66 T.C. 367
(1976), affd. without published opinion 566 F.2d 1168 (3d Cir.
1977). We find that no genuine issue of material fact is in
dispute herein.
Respondent is not herein entitled to judgment as a matter of
law because we do not have jurisdiction to address the issue raised
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by respondent's motion for the reason explained below. However,
because no justiciable issue is raised in the petition, we shall
on our own initiative dismiss petitioner's case for failure to
state a claim on which relief can be granted.
Respondent argues that "It is a legally [sic] impossibility
for the amounts at issue to have been discharged in the bankruptcy
case." Respondent reaches this conclusion through a reading of 11
U.S.C. sec. 523 (1994) which provides exceptions to the
dischargeability of debts under the Bankruptcy Code, including
chapter 7 petitions. Respondent directs us specifically to section
523(a)(1)(A) and (a)(7) of the Bankruptcy Code which identifies the
type of taxes that are nondischargeable. Section 523(a) provides,
in part, as follows:
SEC. 523. EXCEPTIONS TO DISCHARGE.
(a) A discharge under section 727, 1141, 1228(a),
1228(b), or 1328(b) of this title does not discharge an
individual debtor from any debt--
(1) for a tax or customs duty--
(A) of the kind and for the periods
specified in section 507(a)(2) or
507(a)(8)[1] of this title, whether
or not a claim for such tax was
filed or allowed; * * *
1
Sec. 507(a) of the Bankruptcy Code sets forth a
priority listing for the payment of expenses and claims against a
debtor's estate. Sec. 507(a)(8) of the Bankruptcy Code provides
a priority for unsecured claims of governmental units for taxes
measured by income or gross receipts within the time periods set
forth therein.
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* * * * * * *
(7) to the extent such debt is for a fine,
penalty, or forfeiture payable and for the
benefit of a governmental unit, and is not
compensation for actual pecuniary loss, other
than a tax penalty--
(A) relating to a tax of a kind not
specified in paragraph (1) of this
subsection; or
(B) imposed with respect to a
transaction or event that occurred
before three years before the date
of the filing of the petition; * * *
Respondent asserts that the additional tax under section 72(t)
falls within the confines of these exceptions and therefore is
nondischargeable by the bankruptcy court.
Petitioner argues, in essence, that the additional tax under
section 72(t) is a tax penalty rather than an income tax, and that
the penalty is a dischargeable debt. Petitioner further reiterates
his position in the petition and reply to respondent's answer that
the bankruptcy court has already resolved this issue through its
order. Alternatively, petitioner asks us to remand the issue back
to the bankruptcy court for resolution.
The parties apparently request us to determine the
characterization of the deficiency arising under section 72(t) for
purposes of determining its dischargeability. In this regard, we
note the existence of various tests for analyzing the proper
characterization of items as taxes for purposes of priority under
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the Bankruptcy Code. See, e.g., City of New York v. Feiring, 313
U.S. 283 (1941); In re Cassidy, 983 F.2d 161 (10th Cir. 1992)2; In
re Lorber Indus. of Cal., Inc., 675 F.2d 1062 (9th Cir. 1982).
The Tax Court is a court of limited jurisdiction conferred by
statute. Sec. 7442; Commissioner v. Gooch Milling & Elevator Co.,
320 U.S. 418 (1943); Naftel v. Commissioner, 85 T.C. 527, 529
(1985). As such, our jurisdiction does not extend to deciding
whether a deficiency was discharged in a prior bankruptcy
proceeding. Neilson v. Commissioner, 94 T.C. 1, 8-9 (1990); Graham
v. Commissioner, 75 T.C. 389, 399 (1980). "In exercising our
jurisdiction to redetermine deficiencies, we are without
jurisdiction to 'allow or disallow a claim against a debtor's
estate * * * or to discharge taxes as a bankruptcy court might.'"
Neilson v. Commissioner, supra at 9 (quoting Fotochrome, Inc. v.
Commissioner, 57 T.C. 842, 847 (1972)). Consequently, we are
unable to address the proper characterization of the deficiency
arising under section 72(t) for purposes of determining its
dischargeability under the Bankruptcy Code. This issue is properly
resolved by the bankruptcy court, not the Tax Court. Therefore,
respondent's motion will be denied. However, because petitioner
does not dispute any of the underlying deficiencies nor the
2
Interestingly, the Court of Appeals for the Tenth
Circuit in In re Cassidy, 983 F.2d 161 (10th Cir. 1992), held
that the 10-percent additional tax under sec. 72(t) was
characterized as a nonpecuniary loss penalty rather than a tax
for purposes of priority under the Bankruptcy Code.
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accuracy-related penalty determined by respondent in the notice of
deficiency, and because there is no justiciable issue before us, we
shall dismiss petitioner's case for failure to state a claim on
which relief can be granted.
To reflect the foregoing,
An order denying respondent's
motion will be issued; an order of
dismissal and decision in favor of
respondent will be entered.