*26 Decision was entered for respondent.
P did not file Federal income tax returns for the years
1993, 1994, and 1995. R subsequently prepared substitutes for
return (SFRs) for P and issued a notice of deficiency to P based
on the SFRs covering these years. P filed a petition to this
Court, but P's case was later dismissed, and a decision was
entered for R because P failed to state a claim upon which
relief could be granted. R assessed the tax liabilities for the
years 1993, 1994, and 1995. P subsequently filed a petition
under ch. 7 of the U.S. Bankruptcy Code. The bankruptcy court
entered an order generally releasing P from all dischargeable
debts. The bankruptcy court did not expressly determine whether
P's unpaid tax liabilities were discharged. R issued a notice of
intent to levy, and P requested a hearing before an IRS Appeals
officer (A) pursuant to sec. 6330, I.R.C. At the hearing, P
claimed that his unpaid liabilities were discharged in
bankruptcy. A issued a notice of determination sustaining the
levy, and P timely petitioned*27 the Court for review.
Held: We have jurisdiction in this levy proceeding
to determine whether P's unpaid liabilities were discharged in
bankruptcy. Washington v. Commissioner, 120 T.C. 114">120 T.C. 114 (2003), followed.
Held, further: P's unpaid liabilities were
not discharged in the ch. 7 bankruptcy proceeding. Under 11
U.S.C. sec. 523(a)(1)(B) (2000), if a required return is not
filed, then the tax debt is generally excepted from discharge. P
did not file Federal income tax returns, and the SFRs prepared
by R in this case do not constitute "returns" within the
meaning of sec. 523(a)(1)(B) of the Bankruptcy Code. Additionally, R is not enjoined from collecting the unpaid
liabilities because the liabilities were excepted from discharge
and the bankruptcy court did not make an express determination
that the liabilities were discharged. Finally, a default
judgment has not occurred because the debt at issue is not of a
kind that required R to file a complaint in the bankruptcy
court. Therefore, the determination to proceed*28 with collection
by levy is sustained.
*112 OPINION
GOEKE, Judge: The petition in this case was filed in response to a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (the notice of determination). The substantive issue presented is whether the unpaid liabilities that are the subject of the collection action were discharged in petitioner's chapter 7 bankruptcy proceeding. However, before we can reach this issue, we must first address whether we have jurisdiction to decide the issue and whether petitioner is precluded from arguing that his unpaid liabilities were discharged in bankruptcy.
Background
The parties submitted this case fully stipulated. The stipulation of facts and the attached exhibits are incorporated herein by this reference. Petitioner resided in Lake Dallas, Texas, at the time his petition was filed.
Petitioner did not file Forms 1040, U.S. Individual Income Tax Return, for the taxable years 1993, 1994, and 1995. Copies of MFTRA-X transcripts of petitioner's accounts for the tax*29 years at issue reflect that respondent filed "substitutes for return" 1 (SFRs) for these years on February 24, 1997. On May *113 28, 1997, respondent issued a notice of deficiency to petitioner determining deficiencies in and additions to his Federal income taxes for 1993, 1994, and 1995. Petitioner filed a petition and an amended petition with this Court seeking a redetermination. On February 3, 1998, the Court dismissed the case for failure to state a claim upon which relief could be granted and decided that petitioner was liable for the following deficiencies and additions to tax:
*30 Additions to Tax
Year Deficiency Sec. 6651(a)(1) Sec. 6654(a) ____ __________ _______________ ____________
1993 $ 8,307 $ 896 ---
1994 8,460 2,115 $ 436
1995 10,657 2,524 548
In June 1998, respondent assessed the deficiencies and additions to tax decided in the Court's order of dismissal and decision. Copies of MFTRA-X transcripts reflect that interest on the taxes was also assessed in June 1998. 2
On August 5, 1998, petitioner filed a bankruptcy petition under chapter 7 of the*31 U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Texas. On Schedule E, Supplemental Income and Loss, petitioner reported the Internal Revenue Service (IRS) as the holder of unsecured priority claims for the years 1993, 1994, and 1995. On December 7, 1998, the bankruptcy court entered an order of discharge (discharge order) in petitioner's bankruptcy case. The discharge order states:
DISCHARGE OF DEBTOR
It appearing that a petition commencing a case under title 11,
United States code, was filed by or against the person named
above on 08/05/98, and that an order for relief was entered
under chapter 7, and that no complaint objecting to the
discharge of the debtor was filed within the time*114 fixed by the
court (or that a complaint objecting to discharge of the debtor
was filed and, after due notice and hearing, was not sustained);
IT IS ORDERED THAT:
1. The above-name debtor is released from all dischargeable
debts.
2. Any judgment heretofore or hereafter obtained in any
court*32 other than this court is null and void as a
determination of the personal liability of the debtor with
respect to any of the following:
(a) debts dischargeable under 11 U.S.C. sec. 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), (6)
and (15) of 11 U.S.C. sec. 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 process or engaging
in any act to collect such debts as personal liabilities of
the above-named debtor.
Copies of MFTRA-X transcripts reflect that on January 23, 2000, respondent sent to petitioner a notice of intent to levy*33 regarding petitioner's unpaid income tax liabilities for 1993, 1994, and 1995. The copies indicate that on February 10, 2000, petitioner requested a section 6330 hearing. On May 3, 2001, the Appeals Office issued to petitioner a notice of determination regarding petitioner's unpaid liabilities for 1993, 1994, and 1995. The notice states:
Summary of Determination:
It is determined that a levy is appropriate in your case.
Appeals has considered the information presented at the
Collection Due Process hearing. It is determined that the
collection of your unpaid accounts by levy enforcement balances
the government's need to efficiently collect your 1993, 1994 and
1995 tax liabilities with your concerns of intrusiveness.
* * * * * * *
Legal and Procedural Requirements:
It has been concluded that all required laws and procedures have
been followed. The only legal requirements before taking general
enforcement action are the notice and demand and the notice of
intent to levy with a notice of right to a Collection Due
*34 Process Hearing.
Internal computer records indicate that notice and demand of
payment have been made within the required time periods for the
1993, 1994 and 1995 years at issue.
The notice of intent to levy, Letter 1058, was properly mailed
and included with this notice were all required enclosures.
These enclosures include the *115 Form 12153, which you used to make
your Collection Due Process hearing request.
Issues Raised by the Taxpayer:
In your hearing request you challenged the assessment of the tax
liabilities. You previously challenged the assessment in the
United States Tax Court. The Court issued its "Order of
Dismissal and Decision" dated February 3, 1998. The Court's
decision is final. Appeals will not consider challenges to the
underlying liability because you previously challenged the
liability and the Tax Court has issued its decision that the
taxes are due and owing.
The administrative file shows that you filed bankruptcy. You
stated that the unpaid taxes were discharged in your bankruptcy.
Section 523(a)(1)(B)(i) *35 of the Bankruptcy Code states that a tax
liability is not discharged if the return was not filed. SFR
assessed income tax returns are not considered voluntarily filed
and are not dischargeable per Section 523(a)(1)(B)(i).
Internal Revenue Service records disclose that you have not
filed Form 1040 U.S. Individual Income Tax returns for the years
1996, 1997, 1998, 1999. Appeals will not consider an alternative
collection solution because you are not in compliance by
voluntarily filing these income tax returns.
You did not agree with Appeals and the Internal Revenue Service
concerning the interpretation of the income tax and bankruptcy
statutues [sic]. However, you expressed an interest in filing
your 1996 through 1999 income tax returns through regular
Internal Revenue procedures and then submitting an offer in
compromise after any additional liabilities were assessed.
Balancing of Need for Efficient Tax Collection With
Taxpayer's Concern of Intrusiveness:
An acceptable alternative to the levy is not appropriate due to
the fact*36 you are not currently in compliance in filing all
required income tax returns. It appears that levy sources
currently exist. Accordingly, it is determined that the levy
balances the Government's need to efficiently collect the 1993,
1994 and 1995 tax liabilities with your legitimate concern of
intrusiveness.
The notice of determination was signed by Leland J. Neubauer, Appeals Team Manager (the Appeals officer).
On May 11, 2001, petitioner submitted to the Court a letter that the Court filed as petitioner's imperfect petition for lien or levy action requesting a review of respondent's determination to proceed with collection. Because the letter did not comply fully with the requirements of Rule 331, 3 by order dated May 15, 2001, the Court directed petitioner to file a*116 proper amended petition. On June 12, 2001, petitioner filed a proper amended petition. In the petitions, petitioner alleges that collection by levy is improper because his unpaid liabilities were discharged in bankruptcy.
*37 Discussion
The substantive issue for decision in this levy proceeding is whether petitioner's unpaid liabilities were discharged in bankruptcy. Petitioner argues: (1) The taxes were discharged by the discharge order because the order specifically states that petitioner "is released from all dischargeable debts"; (2) respondent is enjoined by the discharge order from collecting the unpaid liabilities; and (3) a default judgment has occurred because respondent did not object to the bankruptcy filing. Petitioner also contends that the bankruptcy court is the only court that can determine whether the unpaid liabilities were discharged.
Respondent claims that petitioner's unpaid liabilities are excepted from discharge under the Bankruptcy Code. Specifically, respondent contends that the taxes are excepted from discharge under 11 U.S.C. sec. 523(a)(1)(B) (2000) because petitioner never filed Forms 1040 for the years in issue. Respondent argues that the bankruptcy court did not enjoin collection of petitioner's unpaid liabilities and that a default judgment has not occurred.
I. JurisdictionBefore deciding the substantive*38 issues, we must decide a jurisdictional issue because petitioner's contention that the bankruptcy court is the only court that can determine whether the unpaid liabilities were discharged raises the question of whether we have the authority to decide this issue. We addressed this question in the context of a lien proceeding in Washington v. Commissioner, 120 T.C. 114">120 T.C. 114 (2003). The instant case involves a levy proceeding under section 6330(d)(1).
In Washington v. Commissioner, supra at 120-121, we stated:
We have held in deficiency proceedings commenced in the
Court under section 6213 that we do not have jurisdiction to
determine whether a U.S. bankruptcy court has discharged a
taxpayer from an unpaid tax liability *117 in a bankruptcy proceeding
instituted by such taxpayer. Neilson v. Commissioner, 94 T.C. 1">94 T.C. 1, 9 (1990); Graham v. Commissioner, 75 T.C. 389">75 T.C. 389,
399 (1980). In so holding, we relied on
Swanson v. Commissioner, 65 T.C. 1180">65 T.C. 1180, 1184 (1976), in which we
observed that an action brought for redetermination of a
deficiency "has nothing to do with collection*39 of the tax nor
any similarity to an action for collection of a debt".
In contrast to a deficiency proceeding, a lien proceeding
commenced in the Court under section 6330(d)(1), such as the
instant lien proceeding, is closely related to and has
everything to do with collection of a taxpayer's unpaid
liability for a taxable year. * * * We hold that in the instant
lien proceeding commenced under section 6330(d)(1) the Court has
jurisdiction to determine whether the U.S. Bankruptcy Court for
the Southern District of New York discharged petitioners from
such unpaid liabilities.
Thus, we exercised jurisdiction in the lien proceeding to decide the bankruptcy discharge issue. 4
*40 A levy proceeding, like a lien proceeding, is commenced under section 6330(d)(1). 5 A levy proceeding is also "closely related to and has everything to do with collection of a taxpayer's unpaid liability for a taxable year." Washington v. Commissioner, supra at 120. There is no reason for distinguishing levy proceedings from lien proceedings for purposes of exercising jurisdiction in the context of this case. Accordingly, we hold that in this levy proceeding we have jurisdiction to determine whether the U.S. Bankruptcy Court for the Northern District of Texas discharged petitioner from the unpaid liabilities for the years 1993, 1994, and 1995.
II. Nature of the Arguments Under Section 6330(c)(2)
Under section 6330, a taxpayer is entitled to notice and an opportunity*41 for a hearing before certain lien and levy actions are taken by the Commissioner in the process of collecting unpaid Federal taxes. Section 6330(c)(1) requires the Appeals officer to obtain verification that the requirements of any applicable law or administrative procedure have been met. Section 6330(c)(2) designates the issues that the taxpayer may raise at the Appeals hearing. 6 The taxpayer is allowed *118 to raise any relevant issue relating to the unpaid tax or the proposed levy, including spousal defenses, challenges to the appropriateness of the collection action, and alternatives to collection. Sec. 6330(c)(2)(A); sec. 301.6330-1(e)(1), Proced. & Admin. Regs. 7 The taxpayer "may also raise at the hearing challenges to the existence or amount of the underlying tax liability" if the taxpayer did not receive a notice of deficiency or did not otherwise have an opportunity to dispute the tax liability. Sec. 6330(c)(2)(B); sec. 301.6330-1(e)(1), Proced. & Admin. Regs. The taxpayer is precluded from raising an issue if it was raised and considered at a previous hearing under section 6320 or in any other previous administrative or judicial proceeding and the person seeking to raise the*42 issue meaningfully participated in the hearing or proceeding. Sec. 6330(c)(4); sec. 301.6330-1(e)(1), Proced. & Admin. Regs. The fact that the Appeals officer may have considered and addressed a challenge not properly at issue in the hearing does not constitute a waiver of the statutory bar and does not operate to empower this Court to review the challenge. Behling v. Commissioner, 118 T.C. 572">118 T.C. 572, 579 (2002); sec. 301.6330-1(e)(3), Q&A-E11, Proced. & Admin. Regs.
*43 In the instant case, petitioner received a notice of deficiency. Therefore, the existence or amount of petitioner's underlying tax liability was not properly at issue at the hearing. Challenges to the existence or amount of the underlying tax liability that are not properly at issue in this proceeding cannot be considered. See, e.g., Pierson v. Commissioner, 115 T.C. 576">115 T.C. 576, 580 (2000); Sego v. Commissioner, 114 T.C. 604">114 T.C. 604, 612 (2000); Goza v. Commissioner, 114 T.C. 176">114 T.C. 176, 183 (2000) (granting motion to dismiss for failure to state a claim upon which relief can be granted where taxpayer received notice of deficiency but at hearing and in this Court did not raise a *119 spousal defense, challenge the appropriateness of the collection action, or offer collection alternatives).
In Washington v. Commissioner, 120 T.C. at 120 n.9, the Commissioner did not dispute that the argument that unpaid liabilities were discharged in bankruptcy raised an issue appropriate for hearing under section 6330(c)(2)(A). Here, unlike Washington, a notice of deficiency was issued. However, respondent does not contest that petitioner's arguments in this case are "challenges*44 to the appropriateness of collection actions" under section 6330(c)(2)(A). 8 Therefore, we shall review the determination that petitioner's unpaid liabilities were not discharged in bankruptcy.
III. Standard of ReviewWhere the validity of the underlying tax liability is not properly at issue, we review the Commissioner's administrative determinations for abuse of discretion. Sego v. Commissioner, supra at 610; Goza v. Commissioner, supra at 183. Petitioner received a notice of deficiency, and his arguments are challenges*45 to the appropriateness of the collection action. Therefore, we review the determination to proceed with collection for abuse of discretion.
In this case, respondent's determination regarding whether petitioner's unpaid liabilities were discharged in bankruptcy required the interpretation and application of bankruptcy law. If respondent's determination was based on erroneous views of the law and petitioner's unpaid liabilities were discharged in bankruptcy, then we must reject respondent's views and find that there was an abuse of discretion. See, e.g., Cooter & Gell v. Hartmarx Corp., 496 U.S. 384">496 U.S. 384, 405, 110 L. Ed. 2d 359">110 L. Ed. 2d 359, 110 S. Ct. 2447">110 S. Ct. 2447 (1990) (abuse of discretion occurs if ruling was based on erroneous view of the law); Abrams v. Interco, Inc., 719 F.2d 23">719 F.2d 23, 28 (2d Cir. 1983) (stating that it is not inconsistent with the abuse of discretion standard to decline to honor a purported exercise of discretion that is infected by an error of law).
*120 IV. Dischargeability of Unpaid Liabilities
Petitioner's general argument at the hearing and before this Court has been that his unpaid liabilities were discharged by the bankruptcy court. The notice of determination addressed petitioner's argument as*46 follows:
The administrative file shows that you filed bankruptcy. You
stated that the unpaid taxes were discharged in your bankruptcy.
Section 523(a)(1)(B)(i) of the Bankruptcy Code states that a tax
liability is not discharged if the return was not filed. SFR
assessed income tax returns are not considered voluntarily filed
and are not dischargeable per Section 523(a)(1)(B)(i).
Thus, we must review respondent's determination that, under 11 U.S.C. sec. 523(a)(1)(B)(i), petitioner's unpaid liabilities were not discharged in bankruptcy. Additionally, we address petitioner's contentions that respondent is enjoined from collecting the unpaid liabilities and that a default judgment has occurred because respondent made no challenge to petitioner's bankruptcy filing.
Paragraph 1 of the discharge order specifically states that petitioner "is released from all dischargeable debts." The discharge order further provides that any judgment obtained in any other court is null and void as a determination of petitioner's personal liability with respect to: (1) Debts dischargeable under 11 U.S.C. sec. 523;*47 (2) unless determined by the bankruptcy court to be nondischargeable, debts alleged to be excepted from discharge under clauses (2), (4), (6), and (15) of 11 U.S.C. sec. 523(a); and (3) debts determined by the bankruptcy court to be discharged. Finally, the discharge order provides that all creditors whose debts are discharged or declared null and void under the order are enjoined from taking any action to collect the debts as personal liabilities of petitioner. Contrary to petitioner's interpretation, the discharge order does not relieve petitioner of liability for all debts. Rather, the order generally releases petitioner from all dischargeable debts, debts alleged to be discharged under certain clauses of 11 U.S.C. sec. 523(a), and other debts the bankruptcy court specifically determined to be discharged.
The general rule is that a debtor who files a chapter 7 bankruptcy petition is discharged from personal liability for all debts incurred before the filing of the petition. 11 U.S.C. sec. 727(b);*121 In re Hatton, 220 F.3d 1057">220 F.3d 1057, 1059-1060 (9th Cir. 2000). However, an individual debtor is not to be discharged*48 in a bankruptcy proceeding from certain specified categories of debts. 11 U.S.C. sec. 523(a); Washington v. Commissioner, 120 T.C. at 121. The first category, contained in 11 U.S.C. sec. 523(a)(1), is described in pertinent part as follows:
section 523. Exceptions to discharge
(a) A discharge under section 727, 1141, 1228(a), 1228(b),
or 1328(b) of this title [title 11] does not discharge an
individual debtor from any debt --
(1) for a tax or a customs duty --
(A) of the kind and for the periods specified in
section 507(a)(2) or 507(a)(8) of this title, whether
or not a claim for such tax was filed or allowed;
(B) with respect to which a return, if required
--
(i) was not filed; or
(ii) was filed after the date on which such
return was last due, under applicable law or
under*49 any extension, and after two years before
the date of the filing of the petition; or
(C) with respect to which the debtor made a
fraudulent return or willfully attempted in any manner
to evade or defeat such tax;
The use of the term "dischargeable" in the first paragraph of the bankruptcy court's discharge order requires application of this category to determine whether the unpaid liabilities of petitioner were dischargeable because there is no evidence in the record that the bankruptcy court specifically determined that the unpaid liabilities were to be discharged. We reviewed a similar bankruptcy court order in Washington v. Commissioner, supra, and reached the same conclusion. 9 Accordingly, we must decide whether the unpaid liabilities are excepted from discharge under 11 U.S.C. sec. 523(a)(1)(B).
*50 *122 A. Filing of "Returns" Under 11 U.S.C. Section
523(a)(1)(B)
As relevant here, 11 U.S.C. sec. 523(a)(1)(B) excepts from discharge a tax debt if "a return, if required, was not filed". The evidence in the record indicates, and petitioner has not disputed, that he was required to file Federal income tax returns for the years 1993, 1994, and 1995. The parties stipulated that petitioner did not file tax returns for these years. Further, the evidence in the record indicates that respondent prepared SFRs for petitioner for each of these years. The relevant issue is whether the SFRs prepared by respondent in this case constitute "returns" within the meaning of 11 U.S.C. sec. 523(a)(1)(B). This is the first opportunity that this Court has had to consider the issue.
A purpose of the return requirement in 11 U.S.C. sec. 523(a)(1)(B) is to prevent a debtor who has ignored the filing requirements from escaping liability for unpaid taxes through the debtor's own misconduct. In re Hindenlang, 164 F.3d 1029">164 F.3d 1029, 1032 (6th Cir. 1999); In re Bergstrom, 949 F.2d 341">949 F.2d 341, 342 (10th Cir. 1991). This*51 corresponds with the principle that "' good faith and candor are necessary prerequisites to obtaining a fresh start.'" In re Hindenlang, supra at 1032 (quoting In re Zick, 931 F.2d 1124">931 F.2d 1124, 1129 (6th Cir. 1991)). The preparation of an SFR by the Commissioner is a simple administrative step which allows the assessment and collection process to begin. If an SFR constitutes a "return" within the meaning of 11 U.S.C. sec. 523(a)(1)(B), then the result of completing this administrative procedure effectively would be to excuse a nonfiling taxpayer from his own deliberate misconduct. This interpretation would render 11 U.S.C. sec. 523(a)(1)(B) a nullity. In re Pruitt, 107 Bankr. 764, 766 (Bankr. D. Wyo. 1989).
The term "return" is not defined in the Bankruptcy Code. In defining the term under 11 U.S.C. sec. 523(a)(1), other courts have looked to the Internal Revenue Code and cases decided by this Court for assistance. See, e.g., In re Hatton, supra at 1060; In re Hindenlang, supra at 1032; In re Bergstrom, supra at 343. Section 6020 specifically discusses*52 returns prepared for or executed by the Secretary, but neither that section nor any other section of the Internal Revenue*123 Code provides a definition of the term "return". 10 In Beard v. Commissioner, 82 T.C. 766">82 T.C. 766 (1984), affd. 793 F.2d 139">793 F.2d 139 (6th Cir. 1986), this Court developed a widely accepted interpretation of the term. In that case, we stated that in order to qualify as a return, a document must meet the following requirements: (1) Purport to be a return; (2) be executed under penalty of perjury; (3) contain sufficient data to allow calculation of tax; and (4) represent an honest and reasonable attempt to satisfy the requirements of the tax law. Id. at 777; see also Cabirac v. Commissioner, 120 T.C. 163">120 T.C. 163, 169 n.10 (2003). This test combines the principles of two Supreme Court cases: Germantown Trust Co. v. Commissioner, 309 U.S. 304">309 U.S. 304, 84 L. Ed. 770">84 L. Ed. 770, 60 S. Ct. 566">60 S. Ct. 566, 1 C.B. 178">1940-1 C.B. 178 (1940), and Zellerbach Paper Co. v. Helvering, 293 U.S. 172">293 U.S. 172, 79 L. Ed. 264">79 L. Ed. 264, 55 S. Ct. 127">55 S. Ct. 127, 2 C.B. 341">1934-2 C.B. 341 (1934).
*53 In addition to the inconsistency between the purpose of the filing requirement under the bankruptcy statute and the proposition that an SFR can constitute a return under that statute, section 6020 and the requirements set forth in Beard v. Commissioner, supra, support the determination that SFRs do not constitute returns within the meaning of 11 U.S.C. sec. 523(a)(1)(B).
1. Section 6020 Returns
Section 6020 authorizes the Secretary to prepare a "return" in certain situations. Under section 6020(b)(1), if any person fails to make a return as required by law, the Secretary is authorized to prepare a return based on his own knowledge and such other information as he can obtain. Any return prepared and subscribed by the Secretary "shall be prima facie good and sufficient for all legal purposes." Sec. 6020(b)(2). 11 However, the return prepared by the Secretary must be signed by the delinquent taxpayer before it can be accepted as the filed return of the taxpayer. Sec. 6020(a); In re Bergstrom, supra at 343. 12 An SFR prepared under section 6020(b)*124 does not constitute a return of the taxpayer for purposes of 11 U.S.C. sec. 523*54 (a)(1)(B) in the absence of the signature of the taxpayer. In re Bergstrom, supra at 343.
*55 In the instant case, petitioner failed to file required returns for the years 1993, 1994, and 1995, and respondent prepared SFRs for these years. Regardless of whether the SFRs were prepared in accordance with section 6020(b), there is no evidence that petitioner signed the SFRs, which is required before an SFR can constitute a return for purposes of 11 U.S.C. sec. 523(a)(1)(B). 13
*56 2. The Requirements Set Forth in the Beard Case
As previously mentioned, this Court applies a four-part test, derived by combining the principles of two Supreme Court cases, to determine whether a filing constitutes a "return". Beard v. Commissioner, supra at 777. 14 Petitioner fails two prongs of the test because he did not sign the SFRs and he failed to make an honest and reasonable attempt to satisfy the tax laws.
*57 Petitioner was required to file Federal income tax returns for the years 1993, 1994, and 1995. Petitioner failed to file tax returns for these years either before or after the assessment. Respondent prepared SFRs for the tax years in issue. *125 There is no evidence in the record that petitioner signed the SFRs. Additionally, there is no evidence that he attempted to file any returns on his own initiative or that he cooperated with the Commissioner in a manner that might represent an honest and reasonable attempt to satisfy the requirements of the tax law. On the basis of the facts of this case, no "returns" were filed within the meaning of 11 U.S.C. sec. 523(a)(1)(B). 15 Accordingly, we hold that pursuant to 11 U.S.C. sec. 523(a)(1)(B), the U.S. Bankruptcy Court for the Northern District of Texas did not discharge petitioner from his unpaid liabilities for the taxable years 1993, 1994, and 1995.
*58 B. Petitioner's Additional ArgumentsIn his petition, petitioner raises additional arguments relating to his bankruptcy filing. Petitioner alleges that respondent is enjoined from collecting the unpaid liabilities and that a default judgment occurred because respondent made no challenge to the bankruptcy filing. The record in this case is unclear regarding whether these issues were raised at the Appeals hearing. Respondent has not argued that petitioner did not raise these issues at the Appeals hearing. In the answer to the amended petition, respondent claims that it was unnecessary to object to the bankruptcy filing because the unpaid liabilities are excepted from discharge. Because it appears that petitioner's additional arguments were raised at the Appeals hearing and because respondent has not objected to the arguments, we shall address the additional arguments.
1. Whether Respondent Is Enjoined by the Order of
Discharge From Collecting the Unpaid Liabilities
Petitioner argues that respondent is enjoined by the discharge order from collecting the unpaid liabilities. However, the discharge order specifically states that only creditors whose*59 debts are discharged by the order or declared null and *126 void under paragraph 2 of the order are enjoined from collecting debts.
Paragraphs 2 and 3 of the discharge order stated:
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 with respect to any of the
following:
(a) debts dischargeable under 11 U.S.C. sec. 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), (6) and
(15) of 11 U.S.C. sec. 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 process or engaging in any act to
collect such debts as personal liabilities*60 of the above-named
debtor.
As previously explained, the unpaid liabilities were not dischargeable under 11 U.S.C. sec. 523(a)(1)(B) because required returns were not filed. Petitioner has not alleged that the unpaid liabilities are excepted from discharge under 11 U.S.C. sec. 523(a)(2), (4), (6), or (15). Finally, the unpaid liabilities were not determined by the bankruptcy court to be discharged. Therefore, pursuant to the discharge order, respondent is not enjoined from collecting the unpaid liabilities.
2. Respondent's Failure To Object or File Claim
Petitioner argues that respondent's failure to object to or file a claim in petitioner's bankruptcy filing resulted in a default judgment in this case. We disagree because the debt at issue is not of a kind that requires an objection or the filing of a complaint during a chapter 7 bankruptcy proceeding in order to later obtain a determination of the dischargeability of the debt.
Bankruptcy courts have exclusive jurisdiction with respect to debts enumerated in 11 U.S.C. sec. 523(a)(2), (4), (6) and (15). 11 U.S.C. sec. 523*61 (c)(1); In re McKendry, 40 F.3d 331">40 F.3d 331, 335 (10th Cir. 1994); In re Galbreath, 83 Bankr. 549, 550 (Bankr. S. D. Ill. 1988); Fed. R. Bankr. P. 4007Advisory Committee's Note (1983); 4 Collier on Bankruptcy, par. 523.03, at 523-17 (15th ed. rev. 1996). With respect to determining *127 whether other debts, including tax debts, 16 are dischargeable, bankruptcy courts have concurrent jurisdiction with other courts. Whitehouse v. LaRoche, 277 F.3d 568">277 F.3d 568, 576 (1st Cir. 2002); In re McKendry, supra at 335 n.3; In re Galbreath, supra at 551; Fed. R. Bankr. P. 4007Advisory Committee's Note (1983) ("Jurisdiction over this issue on these debts [debts listed under 11 U.S.C. sec. 523(a)(1), (3), (5), (7), (8), and (9)] is held concurrently by the Bankruptcy Court and any appropriate nonbankruptcy forum."); 4 Collier on Bankruptcy, par. 523.03, at 523-17. As explained below, this concurrent jurisdiction generally allows dischargeability issues relating to certain debts to be decided by a nonbankruptcy court if the issues have not been addressed by the bankruptcy court in a prior chapter 7 proceeding.
*62 Rule 4007(a) of the Federal Rules of Bankruptcy Procedure provides that a debtor or any creditor may file a complaint to obtain a determination of the dischargeability of any debt. Generally, 11 U.S.C. sec. 523(c) provides that a debtor is discharged from a debt of a kind specified in paragraphs (2), (4), (6), or (15) of 11 U.S.C. sec. 523(a) unless, on request of the creditor to whom the debt is owed, and after notice and a hearing, the court determines the debt is excepted from discharge under one of those paragraphs. 17 The instant dispute involves a tax debt, which is not a debt of a kind specified in paragraphs (2), (4), (6), or (15) of 11 U.S.C. sec. 523(a). Thus, respondent was not required in this case to request a determination in the chapter 7 proceeding that petitioner's unpaid liabilities were excepted from discharge. See Whitehouse v. LaRoche, supra at 576; United States v. Comer, 222 Bankr. 555, 561 (Bankr. E. D. Mich. 1998); In re Thompson, 207 Bankr. 7, 9 (Bankr. M. D. Fla. 1996).
*63 *128 A debt of the kind specified in 11 U.S.C. sec. 523(a)(1) is not discharged in a chapter 7 proceeding, and it continues to be an enforceable obligation after the entry of a debtor's discharge, unless there is an express determination that the tax is dischargeable. In re Thompson, supra at 10; In re Ellsworth, 158 Bankr. 856, 858 (M.D. Fla. 1993). A complaint seeking a determination that a tax debt is not excepted from discharge under 11 U.S.C. sec. 523(a)(1) usually comes from the debtor because tax liabilities covered by this section constitute a claim or debt of a kind which would not otherwise be discharged pursuant to 11 U.S.C. sec. 523(c) in the event that the creditor failed to take timely action. In re Ellsworth, supra at 858; 4 Collier on Bankruptcy, par. 4007.02, at 4007-4. "The law is clear that failure to file a complaint for debts protected from discharge under Section 523(a)(1) does not affect the dischargeability or nondischargeability of the debt." In re Ellsworth, supra at 858. Therefore, if a tax liability satisfies the conditions set forth in 11 U.S.C. sec. 523*64 (a)(1), it is not protected by the general discharge received by the debtor in his prior bankruptcy case. In re Thompson, supra at 10.
In the instant case, petitioner has not alleged, and the evidence in the record does not reflect, that he filed a complaint to obtain a determination of the dischargeability of the unpaid liabilities for the years 1993, 1994, and 1995. Furthermore, the bankruptcy court did not determine the dischargeability of the unpaid liabilities in its discharge order. Because the tax debt in issue is of a kind specified in 11 U.S.C. sec. 523(a)(1), respondent was not required to object or file a claim to protect against the discharge of the unpaid liabilities because the liabilities were automatically excepted from discharge. Accordingly, there is no default judgment applicable.
V. ConclusionAfter the bankruptcy proceeding was complete, the Appeals officer determined that petitioner's unpaid liabilities were excepted from discharge because required returns were not filed and sought to proceed with collection by levy. Petitioner contested the Appeals officer's determination and petitioned this Court to review the determination. *65 We have exercised *129 our jurisdiction and decided the dischargeability issue that was not addressed by the bankruptcy court in petitioner's chapter 7 proceeding. As explained earlier, petitioner's unpaid liabilities were excepted from discharge under 11 U.S.C. sec. 523(a)(1). Accordingly, we hold that respondent may proceed with collection action as determined in the notice of determination with respect to petitioner's taxable years 1993, 1994, and 1995.
Decision will be entered for respondent.
Footnotes
1. The Commissioner has previously represented to this Court that the term "substitute for return" (SFR) is a term used by the Commissioner for returns or partial returns prepared by the Commissioner where the taxpayer did not file a return. Spurlock v. Commissioner, 118 T.C. 155">118 T.C. 155, 156 n.2 (2002). The term SFR has also been used to describe a return prepared by the Commissioner under sec. 6020(b). We note that respondent does not allege and the evidence in the record does not indicate whether the returns prepared by respondent in this case meet the requirements of sec. 6020(b)↩. For convenience, we refer to the returns prepared by respondent as SFRs.
2. We shall refer to the unpaid balance of assessment for petitioner's taxable years 1993, 1994, and 1995 as petitioner's unpaid liability for each of those years. See Washington v. Commissioner, 120 T.C. 114">120 T.C. 114, 116↩ (2003).
3. Unless otherwise indicated, all section references are to the Internal Revenue Code currently in effect, and all Rule references are to the Tax Court Rules of Practice and Procedure.↩
4. See also Thomas v. Commissioner, T.C. Memo. 2003-231 (Tax Court has jurisdiction in lien proceeding to decide whether unpaid tax liabilities have been discharged in bankruptcy); Richardson v. Commissioner, T.C. Memo. 2003-154↩ (same).
5. Sec. 6330(d)(1) provides rules governing judicial review of determinations relating to levies. Sec. 6320(c), which deals with liens, provides that the rules in sec. 6330(d)(1)↩ apply to judicial review of determinations relating to liens.
6. Sec. 6330(c)(2) provides:
(2) Issues at hearing. --
(A) In general. -- The person may raise at the hearing
any relevant issue relating to the unpaid tax or the
proposed levy, including --
(i) appropriate spousal defenses;
(ii) challenges to the appropriateness of
collection actions; and
(iii) offers of collection alternatives, which
may include the posting of a bond, the substitution of
other assets, an installment agreement, or an offer-
in-compromise.
(B) Underlying liability. -- The person may also raise
at the hearing challenges to the existence or amount of the
underlying tax liability for any tax period if the person
did not receive any statutory notice of deficiency for such
tax liability or did not otherwise have an opportunity to
dispute such tax liability.↩
7. The regulations under sec. 6330 apply to any levy which occurs on or after Jan. 19, 1999. Sec. 301.6330-1(j)↩, Proced. & Admin. Regs. Copies of MFTRA-X transcripts reveal that the notice of intent to levy for the years 1993, 1994, and 1995 was sent to petitioner on Jan. 23, 2000.
8. Similar to this case, in Thomas v. Commissioner, T.C. Memo. 2003-231, the taxpayers received a notice of deficiency and we in effect treated their bankruptcy discharge arguments as challenges under sec. 6330(c)(2)(A). See also Richardson v. Commissioner, T.C. Memo. 2003-154↩ n.9, where no notice was issued and we stated that the taxpayer's bankruptcy discharge argument raised an issue relevant to the appropriateness of the collection action.
9. The bankruptcy court's order in Washington v. Commissioner, 120 T.C. 114 at 116 (2003), provided:
IT IS ORDERED THAT:
1. The Debtor is released from all dischargeable debts.
2. Any judgment not obtained in this court is null and void as
to the personal liability of the Debtor(s) regarding the
following:
(a) debts dischargeable under 11 U.S.C. section 523(a) (b) debts alleged to be excepted from discharge under 11
U.S.C. section 523(a)(2), (4), (6) or (15) unless determined
by this court to be nondischargeable;
(c) debts determined by this court to be discharged.↩
10. This Court has previously recognized that a return prepared under sec. 6020(b) might not be considered a return within the meaning of other sections of the Spurlock v. Commissioner, 118 T.C. 155, 161↩ (2002).
11. For further discussions of what constitutes a return prepared by the Commissioner under sec. 6020(b), see Cabirac v. Commissioner, 120 T.C. 163">120 T.C. 163, 170-173 (2003); Spurlock v. Commissioner, supra at 157-161; Spurlock v. Commissioner, T.C. Memo. 2003-124↩.
12. In In re Hofmann, 76 Bankr. 853, 854 (Bankr. S.D. Fla. 1987), the bankruptcy court explained the requirement that the debtor file the required return:
It is undisputed that the debtor never personally filed a
tax return for 1968. However, the debtor argues that literally a
return was filed (by the government) and that the statutory
language of section 523(a)(1)(B) which eliminated the specific
reference in section 17(a) of the former Bankruptcy Act which
specified nondischargeability:
"in any case in which the bankrupt failed
to make a return required by law" (emphasis supplied)
calls for a different interpretation than under the former law.
* * *
The government's position that section 523(a)(1)(B)(i) renders nondischargeable a tax for which the debtor did
not file a tax return is supported by the legislative history.
See Notes of Committee on the Judiciary, S. Rep. No. 95-989,
95th Cong., 2nd Sess. 78 (1978), U.S. Code Cong. & Admin. News
1978, p. 5787 * * *.
[Emphasis supplied.]↩
13. We are aware that under sec. 6651(g), a return the Secretary prepared under sec. 6020(b) is treated as "the return filed by the taxpayer for purposes of determining the amount of the addition" under sec. 6651(a)(2). Cabirac v. Commissioner, supra at 170; Spurlock v. Commissioner, T.C. Memo. 2003- 124. However, this is a specific statutory provision limited to situations involving the determination of whether a taxpayer is liable for a certain addition to tax. There is no analogous provision in the Bankruptcy Code providing that a return prepared under sec. 6020(b) is treated as the return filed by the debtor for purposes of determining the dischargeability of tax debts under 11 U.S.C. sec. 523(a)(1) (2000)↩.
14. Courts that have addressed the issue of whether particular documents constitute a "return" within the meaning of 11 U.S.C. sec. 523(a)(1)(B) have applied the four-part test set forth in Beard v. Commissioner, 82 T.C. 766">82 T.C. 766 (1984), affd. 793 F.2d 139">793 F.2d 139 (6th Cir. 1986). See, e.g., In re Hatton, 220 F.3d 1057">220 F.3d 1057, 1060-1061 (9th Cir. 2000); In re Hindenlang, 164 F.3d 1029">164 F.3d 1029, 1033 (6th Cir. 1999); In re Moroney, 90 AFTR 2d 2002- 7353, 2003-1 USTC par. 50,117 (E.D. Va. 2002); In re Pierchoski, 243 Bankr. 639, 642 (Bankr. S.D. Pa. 1999); In re Billman, 221 Bankr. 281, 282 (Bankr. S.D. Fla. 1998); In re McGrath, 217 Bankr. 389↩, 392 (Bankr. N.D. N. Y. 1997).
15. Although not argued by respondent or addressed by the parties, we note that if the SFRs were deemed returns for purposes of 11 U.S.C. sec. 523(a)(1)(B) then it appears that petitioner's unpaid liabilities would still be excepted from discharge because copies of MFTRA-X transcripts indicate that the SFRs were filed less than 2 years before the start of the bankruptcy proceeding. See 11 U.S.C. sec. 523(a)(1)(B)(ii); Young v. United States, 535 U.S. 43">535 U.S. 43, 48-49, 152 L. Ed. 2d 79">152 L. Ed. 2d 79, 122 S. Ct. 1036">122 S. Ct. 1036 (2002); Washington v. Commissioner, 120 T.C. at 121-122; Thomas v. Commissioner, T.C. Memo. 2003-231↩.
16. A bankruptcy court may determine the amount or legality of any tax, any fine or penalty relating to a tax, or any addition to tax as long as the matter has not been contested before and adjudicated by a judicial or administrative tribunal of competent jurisdiction before the commencement of the case under title 11. 11 U.S.C. sec. 505(a). This authority to fix a debtor's tax liability is discretionary. In re Shapiro, 188 Bankr. 140, 143 (Bankr. E.D. Pa. 1995); In re Queen, 148 Bankr. 256, 259 (S. D. W. Va. 1992), affd. without published opinion 16 F.3d 411">16 F.3d 411 (4th Cir. 1994). If a bankruptcy court specifically considers and decides a tax issue, then this Court will generally adhere to the bankruptcy court's decision on the matter. See Katz v. Commissioner, 115 T.C. 329">115 T.C. 329, 339-340↩ (2000).
17. In a ch. 7 proceeding, if a complaint is filed pursuant to 11 U.S.C. sec. 523(c), then it must be filed no later than 60 days after the first date set for the meeting of creditors. Fed. R. Bankr. P. 4007(c). Complaints other than under 11 U.S.C. sec. 523(c) may be filed at any time. In re Stone, 10 F.3d 285">10 F.3d 285, 289 n.9 (5th Cir. 1994); Fed. R. Bankr. P. 4007(b)↩.