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The Security National Bank of Sioux City, IA v. Vera T. Welte Testamentary Trust

Summarizing by Amir Shachmurove

In re Leonard Mosher

Case Type:
Case Status:
19-8073 (10th Circuit, Oct 27,2020) Not Published
Affirming an order forcibly converting a chapter 11 case to chapter 7, the Tenth Circuit held that the test for determining whether a debtor is a farmer under §101(2) concerns only the debtor’s source of income, not the debtor’s self-identity, and found that the debtor failed to qualify as a farmer such that §1112(c) would prevent conversion.
Procedural context:
Chapter 11 Debtor opposed to involuntarily conversion to chapter 7 asserted that conversion was improper pursuant to 11 U.S.C. § 1112(c) because he was a farmer. The bankruptcy court determined that the debtor was not a farmer within the definition of 11 U.S.C. § 1112(c) because the debtor failed to show that “more than 80% of his gross income during the taxable year” prior to the petition date resulted from debtor’s own farming activities. An order converting the case was entered and the debtor appealed. The district court affirmed, and the debtor appealed to the Tenth Circuit.
Upon appeal to the Tenth Circuit, the debtor, for the first time, argued the bankruptcy court improperly relied upon an error debtor’s tax return mischaracterizing income generated from the resale of livestock and agricultural items. The debtor's return identified his income as generated both from the resale of agricultural products generated by the farming activities of others and from the sale of agricultural products derived from the debtor’s own farming activities. As reported on the tax return, the income attributable to the debtor’s farming activities rather than resale of the product of the farming activities of others equated to less than 80% of the debtor’s income. In support of his argument, the debtor noted that he wore the clothing of a farmer (overalls), got his hands dirty and generally considered himself a farmer. When asked within the bankruptcy court about the source of his income as shown on his tax return, the debtor did not assert that the income had been mischaracterized.
Lucero, Holmes, Eid

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