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a separate adversary action against petitioners requesting that the bankruptcy
court determine that petitioners' debts were nondischargeable pursuant to 11
U.S.C. section 727(a) (1988).3 After filing the above-described complaints,
Pacific and the bankruptcy trustee filed separate motions for summary judgment
with the bankruptcy court. These matters were consolidated under the docket
number for Pacific's action, and all pleadings were filed under that action.
On March 14, 1994, respondent mailed a notice of deficiency to
petitioners determining a deficiency in their Federal income tax for 1989 in
the amount of $78,978 along with an accuracy-related penalty pursuant to
section 6662(a) in the amount of $15,796.
On November 1, 1994, the bankruptcy court entered an order granting
Pacific's motion for summary judgment. The bankruptcy court's order states in
pertinent part:
(2) for money, property, services, or an extension,
renewal, or refinancing of credit, to the extent obtained
by--
(A) false pretenses, a false representation, or actual
fraud, other than a statement respecting the debtor's or an
insider's financial condition;
(B) use of a statement in writing--
(i) that is materially false;
(ii) respecting the debtor's or an insider's
financial condition;
(iii) on which the creditor to whom the debtor
is liable for such money, property, services, or
credit reasonably relied; and
(iv) that the debtor caused to be made or
published with intent to deceive; * * *
3 The bankruptcy trustee argued that the bankruptcy court should deny
petitioners a discharge pursuant to 11 U.S.C. sec. 727(a) (1988), which
provides in pertinent part that a debtor shall be granted a discharge unless
the debtor is found to have transferred, removed, destroyed, mutilated, or
concealed property of the debtor or property of the estate with the intent to
hinder, delay, or defraud a creditor or an officer of the estate charged with
custody of property under the Bankruptcy Code.
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