Justia Government & Administrative Law Opinion Summaries

"The Dawses' struggle with the IRS has a lengthy provenance." Decades ago, Donald and Phyllis Dawes pled guilty for failing to file their 1981 through 1983 tax returns. They also failed to pay their taxes from 1986 through 1988, and 1990. All this led to the IRS to seek and win a declaratory judgment that the Dawses fraudulently conveyed certain assets in an effort to avoid their creditors and that those conveyances were null and void. The IRS proceeded to execute this judgment to take possession of these assets, but before it could do so, the Dawses filed for Chapter 12 bankruptcy protection. "And that brings us to the latest installment of this epic": with permission of the bankruptcy court, the Dawses sold several tracts of land. The sale created income tax liabilities. The Dawses submitted a bankruptcy reorganization plan in which they proposed to treat their newly incurred tax liabilities as general unsecured claims. The IRS opposed the plan "vigorously" but was unsuccessful at the bankruptcy and federal district court. The IRS brought its complaint to the Tenth Circuit, asking to "undo its earlier losses." Upon careful consideration of the lengthy record below, the Tenth Circuit found that the taxes at issue here were incurred by the Dawses after they petitioned for bankruptcy. "So it is that the Dawses must pay the tax collector his due." The post-petition income tax liabilities at issue were not eligible for treatment as unsecured claims under the Bankruptcy Code. The Tenth Circuit reversed the lower courtsâ decisions and remanded the case for further proceedings.

The United States has a $60 million judgment against the defendant, who fled the country, for Medicare and Medicaid fraud. The government served a writ of garnishment (28 U.S.C. 3205) against his interest in a Georgia company, which paid secured creditors, liquidated its assets, and placed slightly more than $4 million in escrow for the claim. Creditors of the Georgia company claimed $175,000. The district court ruled in favor of the government because the creditors had not obtained a writ. The Seventh Circuit vacated and remanded, reasoning that the creditors' claim was against the Georgia company, not against the defendant, and that the defendant's equity interest in the company (which was reachable by the government) may have been subordinate to the interests of creditors. The court noted many unanswered questions about the creditors' interest in the company.