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Internal Revenue Service (IRS) a Form 1040, U.S. Individual
Income Tax Return, for tax year 1985, showing a tax liability of
$12,428.61. No payment was remitted with the return.
During 1995 and in January 1996, petitioners made estimated
tax payments for tax year 1995 totaling $29,000. Petitioners did
not timely file a Form 1040 for 1995. On January 15, 1996,
respondent applied $7,879.24 from petitioners’ 1995 and January
1996 estimated tax payments to petitioners’ outstanding tax
liability for 1985.
On October 15, 1996, petitioners filed a chapter 13
bankruptcy petition in the U.S. Bankruptcy Court for the Eastern
District of Texas (bankruptcy court). Respondent filed proofs of
claim which included petitioners’ 1985 income tax liability as a
general unsecured claim.
During the pendancy of their chapter 13 bankruptcy,
petitioners timely filed a joint Form 1040 for 1996, showing a
tax liability of $10,506. A payment of $2,802 was remitted with
the return.
On July 23, 1997, the bankruptcy court issued an Agreed
Order Allowing Claim of Internal Revenue Service, which allowed
respondent a general unsecured nonpriority claim of $148,734.40,
and a secured claim of $17,247 against petitioners. On October
21, 1997, the bankruptcy court confirmed petitioners’ chapter 13
plan.
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Last modified: May 25, 2011