UNITED STATES TAX COURT

T.C. Memo. 1997-364

UNITED STATES TAX COURT

KATHIE J. SMEE, f.k.a. KATHIE J. ZAVITZ,

Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 15958-97.

Filed August 7, 1997.

Julie P. Gasper, for respondent.

MEMORANDUM OPINION

GOLDBERG, Special Trial Judge:

This case was heard pursuant

to section 7443A(b)(3) and Rules 180, 181, and 182.1

This matter

is before the Court on the motion to stay proceedings filed by

petitioner Kathy J. Smee, f.k.a. Kathie J. Zavitz and

1

Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the years in issue, and

all Rule references are to the Tax Court Rules of Practice and

Procedure.

2

respondent's Motion for Entry of Decision.

By notice of

deficiency dated August 8, 1989, respondent determined

deficiencies in Federal income taxes, additions to tax, and

additional interest as to petitioner and her former husband Keith

A. Zavitz as follows:

Year

Deficiency

Sec.

6653(a)

1979

1980

1981

$878

2,919

1,392

$44

146

n/a

1

Additions to Tax

Sec.

Sec.

6653(a)(1) 6653(a)(2)

n/a

n/a

$70

n/a

n/a

1

Sec.

6659

Additional Interest

Sec.

6621(c)

-0$846

418

n/a

2

2

50 percent of the interest due on the deficiency.

2

120 percent of the interest accruing after Dec. 31, 1984, under sec.

6601 with respect to any substantial underpayment attributable to taxmotivated transactions.

The underlying issue in this case arose from investment tax

credit carrybacks claimed by petitioner and Mr. Zavitz related to

their investment in the CPG Record Partnership.

CPG Record

Partnership leased a master recording from Encore Leasing Corp.

Respondent mailed a notice of deficiency to them on August 8,

1989.

Petitioner and Mr. Zavitz mailed a petition for

redetermination on November 6, 1989, which was filed with the Tax

Court on November 13, 1989, to begin a case at docket No. 2741689.

At the time their petition was filed, they resided in

California.

By Order dated July 29, 1997, the Court severed

petitioner from that case for purposes of considering

respondent’s motion for entry of decision.

3

Petitioner signed a Stipulation of Settlement for Tax

Shelter Adjustments of Petitioners (the Stipulation), filed with

the Court on January 14, 1991.

In the Stipulation, petitioner

agreed that all adjustments in the notice of deficiency related

to the Encore Leasing tax shelter, and petitioner agreed to have

all issues in her case resolved as if petitioner were the same as

the taxpayer in the controlling case, Wolf v. Commissioner,

docket No. 28585-86.

The Stipulation provided that a decision

would be submitted in her case when the decision in the

controlling case became final.

identical stipulation.

Keith A. Zavitz signed an

An opinion was entered in Wolf v.

Commissioner on May 15, 1991, T.C. Memo. 1991-212.

was affirmed.

This decision

Wolf v. Commissioner, 4 F.3d 709 (9th Cir. 1993).

No signed decision document has been submitted.

Petitioner and Mr. Zavitz are no longer married.

It is not

clear from the record when they separated or divorced.

On August 5, 1992, petitioner filed a petition with the U.S.

Bankruptcy Court for the Eastern District of California under

chapter 7 of the Bankruptcy Code (title 11, U.S.C.).

On December

9, 1993, petitioner was granted a discharge in bankruptcy.

The

Order provided that petitioner was released from all

dischargeable debts.

The Order further provided:

2.

Any judgment heretofore or hereafter obtained in any

court other than this court is null and void as a

determination of the personal liability of the debtor with

respect to any of the following:

4

(A)

Debts dischargeable under 11 U.S.C. sec. 523.

(B) Unless heretofore or hereafter determined by order

of this court to be nondischargeable, debts alleged to be

excepted from discharge under clauses (2), (4), and (6) of

11 U.S.C. sec. 523(A).

(C) Debts determined by this court to be discharged

under 11 U.S.C. sec. 523(d).

3.

All creditors whose debts are discharged by this order

and all creditors whose judgments are declared null and void

by paragraph 2 above are enjoined from commencing,

continuing or employing any action, process or act to

collect, recover or offset any such debt as a personal

liability of the debtor whether or not discharge of such

debt is waived.

In October 1994, Mr. Zavitz filed a petition in bankruptcy

under chapter 7.

He was granted a discharge on February 9, 1995.

Mr. Zavitz filed a Complaint to Determine Tax Liability with the

U.S. Bankruptcy Court for the Northern District of Texas.

The

complaint included the tax years at issue herein.

The case at docket No. 27416-89 was calendared for trial on

May 8, 1995, in Dallas, Texas.

Respondent's counsel moved for

entry of decision at that time.

No appearance was entered on

behalf of petitioner and Mr. Zavitz, although petitioner filed a

trial memorandum.

The Court took respondent's motion for entry

of decision under advisement and ordered respondent's counsel to

file a legal memorandum on the issue of whether the Court could

enter a decision while Mr. Zavitz’ complaint filed in the

Bankruptcy Court was pending.

5

No memorandum was filed because in a notice filed July 10,

1995, respondent notified the Court that on June 29, 1995, Mr.

Zavitz filed a petition under chapter 13 of the Bankruptcy Code

with the U.S. Bankruptcy Court for the Northern District of

Texas.

The proceedings at docket No. 27416-89 were automatically

stayed as to Mr. Zavitz.

The Court ordered the parties to file a

written report showing cause why the proceedings should not be

stayed as to petitioner as well.

On September 14, 1995, petitioner filed a request to stay

the proceedings at docket No. 27416-89.

On September 18, 1995,

respondent filed a notice of objection to that request.

By Order

dated April 2, 1996, the Court granted petitioner's request to

stay proceedings.

In addition, respondent's motion for entry of

decision filed May 8, 1995, was denied.

On July 1, 1996, Mr. Zavitz filed a status report notifying

the Court that his bankruptcy proceedings were ongoing.

On July

3, 1996, respondent filed a status report notifying the Court

that by Order dated September 1, 1995, the Bankruptcy Court

dismissed Mr. Zavitz’ case.

Respondent also notified the Court

that on November 6, 1995, Mr. Zavitz filed a chapter 13 petition.

By status report filed with the Court on September 30, 1996,

respondent notified the Court that this case was dismissed on

August 26, 1996.

6

The Court issued an Order dated October 7, 1996, lifting the

stay in the proceedings at docket No. 27416-89 and restoring the

case to the general docket for trial or other disposition.

However, by notice filed with the Court on January 17, 1997,

respondent notified the Court that Mr. Zavitz filed a petition

with the U.S. Bankruptcy Court for the Northern District of Texas

on August 30, 1996, and all proceedings were automatically

stayed, pursuant to the provisions of 11 U.S.C. section 362(a)(8)

(1994).

Petitioner filed a status report with the Court on

January 17, 1997, requesting that the proceedings be stayed as to

her, as well, pursuant to 11 U.S.C. section 362(a)(8).

By Order

dated January 23, 1997, the Court ordered respondent to file any

objection to petitioner's request.

On January 28, 1997,

petitioner filed a motion to stay proceedings which was identical

to her status report filed earlier.

Respondent filed an

objection to petitioner's request to stay proceedings.

A hearing

on the motion was calendared for February 24, 1997, in Dallas,

Texas.

Petitioner made no appearance at the hearing.

Originally, petitioner and Mr. Zavitz were represented by

counsel, William J. Ruhe, Jr.

William J. Ruhe, Jr., subsequently

was withdrawn as counsel of record for Kathy J. Smee, f.k.a.

Kathie J. Zavitz, on August 25, 1995.

Respondent filed a motion

for entry of decision as to petitioner which the Court took under

advisement.

Subsequently, as previously stated, the Court

7

severed petitioner from the case at docket No. 27416-89 for

purposes of considering respondent’s motion.

In her motion, petitioner argues that rulings of the

Bankruptcy Court are binding on the Tax Court.

Petitioner

further contends that by order of the U.S. Bankruptcy Court for

the Eastern District of California, she was released from all

dischargeable debts.

Respondent does not dispute that an order of the Bankruptcy

Court is binding.

Respondent argues, however, that petitioner

has not alleged that the Bankruptcy Court made a determination

with respect to her tax liability for the years in issue.

Respondent argues that the deficiencies in issue are not

dischargeable, citing 11 U.S.C. sections 523 and 507(a)(8)

(1994).

Moreover, respondent argues that this Court is without

jurisdiction to determine whether petitioner's tax liability was

discharged.

Finally, respondent argues that the proceedings

should not be stayed as to petitioner because she is a separate

taxpayer from Mr. Zavitz.

Generally, the filing of a petition in bankruptcy acts as an

automatic stay against, inter alia, the continuation of a

proceeding before the Tax Court concerning the debtor.

sec. 362(a)(8).

11 U.S.C.

An automatic stay continues until the case is

closed, the case is dismissed, or a discharge is granted,

whichever is earliest.

11 U.S.C. sec. 362(c)(2)(1994).

"After

8

the automatic stay has been removed there is no bar to this

Court's accepting jurisdiction or continuing a proceeding that

had been petitioned prior to the automatic stay."

Commissioner, 94 T.C. 1, 8 (1990).

Neilson v.

Where taxpayers file a joint

petition, the filing of a petition in bankruptcy by one taxpayer

individually does not affect the jurisdiction of the Tax Court to

redetermine the deficiency with respect to the other taxpayer.

See McClamma v. Commissioner, 76 T.C. 754, 758 (1981); Baron v.

Commissioner, 71 T.C. 1028 (1979).

The Tax Court is a court of limited jurisdiction conferred

by statute.

See sec. 7442; Neilson v. Commissioner, supra at 9.

Generally, the Court's jurisdiction is dependent upon a notice of

deficiency and a timely filed petition.

Secs. 6212 and 6213.

The Court does not have jurisdiction to determine whether a

deficiency was discharged in a bankruptcy proceeding.

See

Neilson v. Commissioner, supra; Graham v. Commissioner, 75 T.C.

389, 399 (1980); Tortu v. Commissioner, T.C. Memo. 1994-243.

Petitioner received a discharge in bankruptcy on December 9,

1993.

Thus, we are not barred from continuing these proceedings

as to petitioner.

Furthermore, we do not believe that there is

any reason to stay these proceedings with respect to petitioner

as a result of the automatic stay imposed with respect to Mr.

Zavitz.

9

Finally, we are without subject matter jurisdiction to

determine whether the deficiencies involved herein were

discharged by the Bankruptcy Court.

On the basis of the foregoing, Petitioner’s Motion to Stay

Proceedings filed January 28, 1997, will be denied, and

respondent’s Motion for Entry of Decision filed on February 24,

1997, will be granted.

To reflect the foregoing and the stipulation,

An appropriate order and

decision will be entered.