W. Richard and Janice J. Morgan - Page 2

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          otherwise indicated, all section references are to the Internal             
          Revenue Code in effect for the years in issue.                              
               Some of the facts have been stipulated, and the stipulated             
          facts are incorporated in our findings by this reference.                   
          Petitioners resided in Raymore, Missouri, at the time they filed            
          their petition.  Assessments were made against petitioners for              
          Federal income tax for 1981, 1982, and 1983; the assessments were           
          related to petitioners’ investments in the early 1980's in tax              
          shelter activities.                                                         
               Petitioners filed for bankruptcy on July 29, 1994.  The                
          Internal Revenue Service (IRS) filed a proof of claim in the                
          bankruptcy case for 1981, 1982, and 1983 Federal income taxes.              
          Petitioners objected to the IRS proof of claim related to the               
          1983 tax liability in the bankruptcy case but later withdrew that           
               On December 22, 1994, the Bankruptcy Court granted                     
          petitioners a discharge.  Petitioners’ tax liability for 1981 and           
          1982 was not discharged in the bankruptcy.  Petitioners’ tax                
          liability for 1983 was discharged in the bankruptcy, but the                
          discharge does not prevent the collection of the 1983 liability             
          from property that was exempt from the bankruptcy estate.                   
          Petitioners were aware that the IRS retained the right to levy on           
          their exempt assets.  Petitioners’ withdrawal of their objection            

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