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-Spencer L. Simons, former Director, O'Quinn Law Library and Associate Professor of Law



Thursday, November 13, 2014

U.S. Court of Appeals for the Ninth Circuit Discharges Tax Debts Despite "Lavish" Spending

Forbes is reporting that the U.S. Court of Appeals for the Ninth Circuit has ruled in favor of a taxpayer seeking to discharge his tax liability through the bankruptcy process. In this case, Hawkins v. Franchise Tax Board, the court reversed the district court's decision that a "chapter 11 debtor's tax debts were excepted from discharge on the basis of his willful attempt to evade or defeat taxes under 11 U.S.C. Section 523 (a)(1)(C)." The debts included $19 million owed to the I.R.S. and $10.4 million to the California Franchise Tax Board based on proof of claims filed with the U.S. Bankruptcy Court. The article by Forbes discusses the potentially broad impact of this decision, which focuses on whether lavish spending itself constitutes "willful" under I.R.C. Section 523(a)(1)(C).

More information can be found regarding the discharge of tax debts through bankruptcy in Bloomberg BNA's Tax Management Portfolio Part VII (Portfolio No. 638-4th) (KF6289.A.1T35 no. 683-4th) by Steven R. Mather and Paul H. Weisman. This is also available using the library's subscription to Bloomberg BNA Tax and Accounting Center (available from the law library's website using the drop-down menu under "Legal Databases") and BloombergLaw.com.

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