Thomas L. Freytag and Sharon N. Freytag - Page 4

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          determination from that court that she was not liable for the               
          taxes and addition to taxes at issue solely because she was an              
          "innocent spouse" under section 6013(e) and section 6004 of the             
          Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647,           
          102 Stat. 3342, 3685.                                                       
              On August 12, 1993, the bankruptcy court issued a                      
          "Memorandum Opinion Regarding Sharon N. Freytag's Objection to              
          IRS Claim".  The court stated that it could "find no reason why             
          it would be inequitable to hold Sharon liable for the                       
          consequences of the understatements."  It accordingly decided               
          that Mrs. Freytag was liable for the taxes for 1981 and 1982 and            
          could not rely successfully upon the "innocent spouse" defense.             
          On May 31, 1994, the bankruptcy court entered an "Agreed Order              
          Pertaining to Dischargeability" in which it discharged:  (1)                
          Penalties and interest on penalties claimed by the IRS for the              
          Freytags' taxable years 1978-1982; (2) penalty interest imposed             
          by section 6621(c) to the extent it exceeded the normal rate of             
          interest; and (3) $5,000 in tax and $10,941.89 in interest for              
          the year 1978.  With regard to the amounts not discharged, the              
          parties seem to agree that while no dollar amount was stated in             
          the order, the amount of the tax debts for 1981 and 1982 could be           
          determined by reference to that order and the proof of claim, as            
          amended, for the years at issue in this case.                               
               In view of the bankruptcy court's order of discharge, this             
          Court lifted the stay of proceedings.  On August 20, 1996,                  




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