11 USC 521(e) allows the Debtor to Avoid Dismissal of Case if the Failure to Provide Required Tax Return is Attributable to Circumstances Beyond her Control

11 USC 521(e) allows the Debtor to Avoid Dismissal of Case if the Failure to Provide Required Tax Return is Attributable to Circumstances Beyond her Control

1st Franklin Financial Corp. (the “Movant“) filed a Motion to Dismiss for Failure to Provide Timely Tax Returns (the “Motion“) on December 13, 2017. A hearing was held on the Motion on February 5, 2018 at 2:00 p.m. (the “Hearing“). In the Motion, Movant asserts that, pursuant to 11 U.S.C. § 521(e)(2)(A), the Debtor was required to provide to the Chapter 7 Trustee (and any timely requesting creditor), no later than seven (7) says before the first-scheduled meeting of creditors, “a copy of the Federal Tax Return for the most recent tax year prior to filing . . .” (Docket No. 23, para. 1). Movant further asserts that, after making its timely request for the Debtor’s most recently filed tax return (filed with the Court at Docket No. 15), the Debtor failed to provide it with such tax return, and that pursuant to 11 U.S.C. § 521(e)(2)(B), this case must be dismissed.

At the Hearing, counsel for Movant appeared in support of the Motion, and the Debtor appeared pro se in opposition. It was undisputed that the Debtor had not filed a federal income tax return in 2016, the most recent tax year prior to the filing of this case. The Debtor also stated at the Hearing that the last tax return she filed was for 2007, that she was not required to file federal income tax returns from 2008 to 2014 because she earned only nontaxable income during those years, and that her income in 2015 was below the threshold amount required for filing a federal tax return. The Debtor further noted that, at the meeting of creditors held on November 27, 2017, Martha A. Miller, the Chapter 7 Trustee appointed in this case (the “Trustee“), advised the Debtor to file an affidavit of tax returns as to the 2015 and 2016 tax years, and that filing such an affidavit would relieve the Debtor of providing any further documentation regarding her tax returns to the Trustee. The Debtor complied with this request and filed an Affidavit of Tax Returns  that same day, asserting that (1) she had not filed an income tax return in 2015 or 2016, (2) that prior to 2015, she was not required to file an income tax return, and (3) that the last income tax return she filed was in “approximately 2007.”

With regard to the tax return language of 11 U.S.C. § 521(e)(2)(A), counsel for Movant contends that a tax return “for the most recent tax year ending immediately before the commencement of the case and for which a Federal income tax return was filed” applies in this case to either the 2016 return or the 2007 return, such that the Debtor’s failure to provide either tax return constitutes grounds for dismissal under 11 U.S.C. §§ 521(e)(2)(B) or (C). The Debtor reiterated that she had not filed a 2016 income tax return and therefore could not produce to the Trustee or Movant a return that did not exist. The Debtor also stated that she was unaware of where her 2007 tax return would be, how she could obtain such return, or who prepared that return, given that the 2007 tax return was filed approximately ten (10) years ago.

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