UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF ALASKA

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In re: KELLY C. HEITSTUMAN and MARY C. HEITSTUMAN,                         Debtors.

Case No. A01-01223-DMD                      Chapter 13

 

SUPPLEMENTAL MEMORANDUM REGARDING OBJECTIONS TO

INTERNAL REVENUE SERVICE CLAIMS

                      This court’s memorandum of June 5, 2003 is incorporated by reference. At a status conference held June 10, 2003, the debtor agreed that the taxes asserted as a civil penalty in the late claim were of the same general type of withholding taxes asserted in the timely claim. Counsel for the debtor argued, however, that allowance of a late-filed penalty for corporate withholding taxes would be inequitable under the facts of this case. I conclude that the late-filed claim bears a reasonable relationship to the timely claim.

                      The second step of the Osborne analysis is whether the balancing of equities supports allowance of the new claim. I have considered the equitable factors of Miss Glamour as well as their application by the Osborne trial court. Here the debtors claim reliance upon the early claim because they chose not to proceed to confirmation immediately after the claims bar date lapsed on May 7, 2002. I don’t think that is reasonable reliance. The debtors acknowledged the IRS penalty claim as an undisputed personal liability in their schedules and plan of November 2001. They      7 ABR 544  had been in chapter 13 from November of 2001 through February of 2003 without taking any action toward confirmation of a plan. The debtors were not diligent in the prosecution of their chapter 13 plan. Their tactics enabled the IRS to file another claim. I do not find reasonable reliance on the first claim under such circumstances.

                      The debtors’ strongest equitable argument is that the elements of a penalty claim for corporate withholding taxes against a corporate officer are different from a withholding tax liability assessed against a sole proprietorship. In In re Sims, ¹ a case cited with approval by the Osborn trial court, the court found that a late-filed penalty claim for employment and withholding taxes was not a timely amendment of a claim for individual income taxes. Here, however, the initial claim included a claim for withholding taxes. I find Sims inapplicable to the facts of this case.

                      After consideration of the equities, I find that the IRS may amend its original proof of claim to include a claim for imposition of a 100% penalty for unpaid withholding taxes imposed against a corporate officer. This does not resolve all of the debtors’ objections, however, and an evidentiary hearing must be set. No appealable final judgment can be issued until all of the debtors objections have been fully adjudicated.  

DATED: June 13, 2003.

                                                                                                                    BY THE COURT

                                                                                                                    DONALD MacDONALD IV

                                                                                                                    United States Bankruptcy Judge

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N O T E S:

1  40 B.R. 186, 190 (Bankr. N.D. Ga. 1984).