Charles Breland, Jr. v. Commissioner of IRS
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 23-12345 (11th Circuit, May 31,2024) Not Published
- Tag(s):
-
- Ruling:
- The Eleventh Circuit affirmed the tax court's determination that the consent order entered between the IRS and Breland during the pendency of his chapter 11 bankruptcy did not fix Breland's tax liability for the years at issue, as the order fixed the claim for plan confirmation and claims allowance purposes, but did not constitute a determination of tax liability under section 505 of the Bankruptcy Code. Therefore, the IRS was not barred from assessing additional taxes by the doctrines of collateral estoppel or res judicata.
- Procedural context:
- Prior to confirmation of Breland's chapter 11 case, the IRS and Breland entered a consent order establishing the amount of the IRS's claim and resolving the IRS's objection to confirmation. Post-confirmation, the IRS sent Breland notices of deficiency for additional taxes for periods addressed by the consent order, and Breland objected to the notices in tax court, asserting that the consent order fixed the amount of the Breland's tax liability for those periods. The argument was rejected by the tax court, and Breland appealed, arguing that collateral estoppel and res judicata precluded the IRS from pursuing the additional taxes. In affirming the tax court's decision, the Eleventh Circuit concluded that the consent order simply determined the IRS's claim against the bankruptcy estate but did not bar the IRS from assessing additional taxes for the periods subject to the consent order, because the tax liability was not determined under section 505 of the Bankruptcy Code and confirmation of a plan does not fix nondischargeable tax liabilities under the teachings of Gurwitch.
- Facts:
- Breland filed a petition seeking relief under chapter 11 of the Bankruptcy Code on March 11, 2009. During the pendency of the bankruptcy case, the IRS amended its claim four times, ultimately asserting a claim in the $6,843,878.26. Breland objected to the IRS's claim, and the IRS objected to confirmation of Breland's chapter 11 plan. Neither Breland nor the IRS sought a determination of Breland's tax liability under section 505 of the Bankruptcy Code. To resolve the objection to confirmation, the IRS and Breland entered the consent order, which reinstated the IRS's prior claim in the amount of $2,020,697.01, which amount would be paid under Breland's chapter 11 plan. Breland's objection to the IRS's claim was preserved, and upon default under the plan, the IRS's right to assess and collect taxes was reinstated as they existed prior to the bankruptcy filing. Breland did not default under the plan, but roughly ten months after the entry of the consent order, the IRS sought leave of the bankruptcy court to amend its claim to assert additional taxes against Breland. The bankruptcy court denied the request, and the IRS appealed. The case was remanded by the district court to the bankruptcy court, with the instruction to determine whether the case was governed by In re Gurwitch. The bankruptcy court once again denied the IRS's request to amend the claim, distinguishing Gurwitch on the grounds that the instant case involved a consent order. The IRS took another appeal, but the district court affirmed, and the bankruptcy case was closed on October 7, 2016.
While the appeals of the bankruptcy court's decision to deny the IRS's request to amend its claim were pending, the IRS issued deficiency notices to Breland for prepetition tax years, specifically 2004, 2005, and 2008. Breland challenged the notices in tax court, but the case in tax court was stayed until the closure of the bankruptcy case. On summary judgment, the tax court concluded that the consent order only fixed the amount of the IRS's claim for plan confirmation issues, but did not determine the amount of Breland's federal tax liabilities for the periods at issue or preclude the IRS from asserting additional debts.
- Judge(s):
- Wilson, Branch, and Luck, Circuit Judges.
ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!
