Opposition — Gens v. United States, 103 S. Ct. 209 (1982) (No. 82-0084)

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that an involuntary petition in bankruptcy

she failed to prove that she had made any tax pay-

ments for the years in issue.

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TABLE OF CONTENTS

Page

Opinions below 1

Jurisdiction 1

Statement 2

Argument 5

Conclusion 11

TABLE OF AUTHORITIES

Cases:

Acme Harvester Co. v. Beekman Lumber Co., 222

US. 300 6, 10

Byrne, Matter of, 5 Bankr. 556 7

England v. Doyle, 281 F.2d 304 6

Ford, Bacon & Davis, Inc. v. Holahan, $11 F.2d

901, cert. denied, 878 US. 918 7,10

Glaubke v. United States, 41 A. F. T. R. 2d 759 11

Lazarus v. Prentice, 234 U.S. 268 6, 10

McAuley v. United States, 525 F.2d 11006 8, 9, 10

Rush, In re, 10 Bankr. 518 9

—s v. McAllister Brothers, Inc., 310 F.2d

7

led meio % Malkin, 317 F. Supp. 612 8

United States v. Verlinsky, 489 F.2d 106 ~

Statutes and rule:

Bankruptcy Tax Act of 1980, Pub. L. No. 96-589,

Section 6(a), 94 Stat. 3407 78

Federal Tax Lien Act of 1980, Pub. L. No. 89-719,

80 Stat. 1125 8

Section 106(a), 80 Stat. 1189 6

Internal Revenue Code of 1954 (26 U.S.C.) :

Section 6402 (a) 11

Section 6502 5

Section 6508 (b) 4. 5, 6, 8. 9

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7

2, 8, 4. 8, 8, 11

Bankruptcy Act, 11 U.S.C. (1976 ed.) 1 et seq.:

Section lla (11 U.S.C. (1976 ed.) 20 (a)) 7

Section 70a (11 U.S.C. (1976 ed.) 110(a)).. 7

Section 70d (11 U.S.C. (1976 ed.) 110(d)).. 7

Section 70d (1) (11 U.S.C. (1976 ed.) 110

d) ()) 7

Bankruptcy Code, Pub. L. No. 95-698, 92 Stat.

2549 7

Bankruptey Rules, Rule 401 (a) 8

Miscellaneous:

4A Collier on Bankruptey (14th ed. 19783) 6

H.R. Rep. No. 1837, 88d Cong., 2d Seas. (1954) 6

Rev. Rul. 74-611, 1974-2 Cum. Bull. 399... 11

Rev. Rul. 80-7, 1980-1 Cum. Bull. 296 11

S. Rep. No. 1708, 89th Cong., 2d Seas. (1966) x

ee hee ns A ee ee

In the Supreme Court of the United States

Oro TERM,1982

No. 82-84

RICHARD H. GENS AND HELEN D. GENs,

PETITIONERS

V.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF CLAIMS

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The Court of Claims issued two opinions. The first

opinion (Pet. 10-23) is reported at 615 F.2d 1335, and

the second (Pet, 24-28) is reported at 673 F.2d 366.

STATEMENT

Petitioners Richard H. Gens and Helen D. Gens

filed this income tax refund suit in the Court of

Claims seeking a refund of overpayments

of $74,585.14 on their joint federal income tax returns

for 1968, 1970, and 1971 (Pet. 10; Trial Judge Op.

6). The Commissioner of Internal Revenue applied

these overpayments to certain assessments of unpaid

withholding and FICA taxes which had been made on

March 19, 1971, and January 15, 1973, under Section

ters of 1970 (Pet. 10-14; Trial Judge Op. 6).? No

“Trial Judge Op.” refers to the findings of fact of the

were as follows (Trial Judge Op. 6) :

1968 joint return $32,628.13

1970 joint return ö 89,802.09

1971 joint return 2,154.92

Total amount credited $74,585.14

On their federal income tax return for 1968, petitioners

reported a tax liability of $60,328.97, which was satisfied as

follows (Pet. 26; Trial Judge Op. 6) :

Federal income tax withheld $28,444.60

Excess FICA tax withheld 2,468.58

Cash payment 19,415.79

At the time of trial, petitioner Richard Gens could not recall

whether the cash payment made in 1968 was made with his

funds or with his wife’s funds (Pet. 26). No W-2 forms were

1 ie Einf ee

F Hu 1 ie 14 f 1 th

Apa ane i ite 10 11141

i atte Hit 0 Hy i 1110

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tioner Richard Gens for $109,968.28 in interest

$61,541.39 in unpaid assessments (Trial Judge Op.

19, 1971, from the date of assessment until the under-

lying taxes were paid on January 17, 1977 (Pet. 14).

In its first opinion in this case, the Court of Claims

held that the government’s counterclaim for interest

on the assessments of March 19, 1971, was timely filed

tions under Section 6503(b) of the Code until the peti-

tion was dismissed on April 3, 1972, and for six

months thereafter (Pet. 18-22). The court pointed out

that one of the purposes of the federal bankruptcy

statute is to preserve intact the property of an alleged

bankrupt from the date of the filing of a petition in

bankruptcy, so that the estate can be administered

under the statute if the debtor is later adjudicated

bankrupt (Pet. 20-21). Accordingly, the property of

the debtor was deemed to be under the control of the

bankruptcy court while the petition was pending, even

if it was later dismissed (Pet. 21-22). With respect

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to the elaim of petitioner Helen Gens for the refund

of one half of the income tax overp yments made with

respect to petitioners’ 1968, 1970, and 1971 joint re-

turns, the Court of Claims remanded the case to the

trial judge for a factual determination as to the con-

tribution of petitioner Helen Gens to petitioners’

joint taxable income and as to her contribution to the

overpayments in question (Pet. 22-23).

In its second opinion, the Court of Claims affirmed

the holding of the trial judge that Helen Gens was not

entitied to a refund of any of the overpaid taxes for

the years in question because the petitioners had failed

to prove that any part of the overpayment had been

made with her funds (Pet. 26-27). The court found

that she was not employed during the years in issue,

and that there was no evidence to show that her funds

were the source of any part of petitioners’ cash pay-

ment of taxes in 1968 (Pet. 26). Accordingly, the

court held that the Commissioner had properly cred-

ited the entire amount of petitioners’ income tax over-

payments against the separate liabilities of petitioner

Richard Gens under Section 6672 of the Internal Rev-

enue Code (Pet. 28).

f 1

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for his creditors. eee

1 F.2d 304, 306 (9th Cir. 1960). If

ve possession passes into the

the

as “trustee”

28

adjudicated a bankrupt, the title of

by Section 106(a), Federal Tax Lien Act of

L. No. 89-719, 80 Stat. 11389.

has long been the rule that generally, “upon the

F

bankruptcy were terminated by diaminal f be pe

1212 —

Et

?

the trustee in bankruptcy, which is vested “as of the

date of the filing of the petition initiating a

ing under * [the Bankruptcy] Act” (Bankruptcy

Act, Section 70a (11 U.S.C. (1976 ed.) 110(a), re-

lates back to the date the petition was filed. See Section

70d of the Bankruptcy Act (11 U.S.C. (1976 ed.)

110(d)); Ford, Bacon & Davis, Inc. v. Holahan,

311 F.2d 901, 902-903 (5th Cir. 1962), cert. denied,

fair equivalent value,” and not for past consideration.

Section 70d(1) of the Bankruptcy Act (11 U.S.C.

(1976 ed.) 110(d)(1)). Schilling v. McAllister

Brothers, Inc., 310 F.2d 123 (2d Cir. 1962).

Moreover, the filing of an involuntary petition, like

the filing of a voluntary petition, activates the auto-

matic stay provisions of Section lla of the Bank-

ruptey Act (11 U.S.C. (1976 ed.) 29(a)). Although

the automatic stay of creditors’ actions under Section

lla (11 U.S.C, (1976 ed.) 29(a)),° did not apply

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598, 92

ing Title 11 of the United States Code into positive law

Under the new Bankruptcy Code, the automatic stay provi-

sion contained in 11 U.S.C. (Supp. IV) 862 is applicable to all

pre-petition claims aga.nst the debtor. The stay thus affects

nondischargable tax claims in all cases subject to the Bank-

ruptcy Code. Matter of Byrne, 5 Bankr. 656 (W. D. Pa. 1980).

See Section 6608(i) as added by Section 6(a) of the Bank-

o

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nondischargeable tax debts, such as the Section 6672

liabilities in issue in this case (see Bankruptcy Rules,

Rule 401 (a)), the filing of the petition and the result-

ing transfer of the debtor’s assets into the custody of

the bankruptcy court created substantial uncertainty

concerning the availability of assets for the satisfac-

tion of his nondischargeable taxes.

As the Senate Finance Committee pointed out in its

consideration of the legislation that resulted in the

Federal Tax Lien Act of 1966, Pub. L. No. 89-719,

80 Stat. 1125, the purpose of Section 6503(b) of the

Internal Revenue Code is to prevent the statute of

limitations on the collection of taxes from running

against the government while the taxpayer’s assets

are not subject to administrative collection procedures

because they are in the custody or control of a court.

S. Rep. No. 1708, 89th Cong., ?4 Sess. 24 (1966). In

cases in which a bankrupt’s adjudication has been fol-

lowed by protracted proceedings for the settlement of

the bankrupt estate, the courts have reached differing

conclusions as to when the Section 6503 (b) suspension

of the statute of limitations ceases and the statute

begins again. United States v. Verlinsky, 459 F.2d

1085, 1088 (5th Cir. 1972) (suspension lifted by the

discharge of the debtor); McAuley v. United States,

525 F.2d 1108, 1114 (9th Cir. 1975) (suspension

tioner Richard Gens were in the custody of the bank-

ruptey court for less than six months, i.e., from Oc-

tober 18, iv7i, when the involuntary petition against

him was filed, to April 3, 1972, When the petition was

dismissed (Pet. 12). This period, plus the statutory

six-month additional suspension provided for in Sec-

tion 6503(b), brings the total suspension of the stat-

ute of limitations in this case to 351 days, i.e., from

October 18, 1971, to October 3, 1972. Unlike the ad-

ministration of a bankrupt estate, which may be pro-

longed by the existence of numerous disputed claims,

uncertainties as to the status of secured creditors, or

terim trustee, the debtor may continue to dissipate

the assets of the estate. See In re Rush, 10 Bankr.

23-525 (N.D. Ala. 1980). As the court pointed

A v.

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voluntary one, there

uncertainty, during which the debtor had an oppor-

tunity to contest the allegations in the petition. Dur-

ing this initial period, the uncertainty engendered by

the existence of the petition was similar to that de-

scribed by the court in McAuley v. United States, su-

pra. The bankrupt’s exempt property had not yet

been set apart from the property of the estate, but

the rights of the trustee, if one was eventually ap-

pointed, to property of the estate had already

Lazarus v. Prentice, supra, 234 U.S. at 266-267

(upon filing of petition and adjudication in bank-

ruptcy, receiver entitled to take possession of bank-

of Claims erred in holding that Helen Gens had failed

to prove that she was entitled to a refund of any part

of the joint income tax overpayments which the In-

ternal Revenue Service had applied against the sepa-

ities ze

1

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d. id: ig 123,

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15 Th HE

DEL He

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

1982