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Thank you so much for the responses on this, I appreciate it.
In this case, it is a 7, not a 13. Talked with clients today, and we
crunched numbers obsessively. We found though that if we wait until
Feb 1st, a significant enough portion of the IRA withdrawal drops out
of the six month window, and bingo, problem solved, they can file
their 7 without issue.
I do still wonder about the question though...I know that in
Schedules I & J, if we have for example a self-employed debtor who is
not on a payroll whereby taxes are being withdrawn, we can still
figure those taxes into the mix - at least I have in the past. So I
guess what I'm asking is can we do the same in the means test, or is
it rigidly a matter of what has actually gone out in the past six
months, period. I would imagine the latter, but perhaps not?
Wish the 9th Circuit would follow the 8th on the IRA withdrawals!
wrote:
>
> I'm running so this may not be a complete answer, but can debtor
bifurcate
> the tax year? Better yet, this is December 19. Can he wait to
file until
> 1/1/09? Then the tax obligation is a priority debt to be paid
through the
> 13.
>
> David A. Tilem
> Certified Bankruptcy Specialist*
> Law Offices of David A. Tilem (a debt relief agency)
> 206 N. Jackson Street, #201, Glendale, CA 91206
> Tel: 818-507-6000 Fax: 818-507-6800
>
> * Bankruptcy specialist cert. by State Bar of CA Bd of Legal
> Specialization.
> Business bankruptcy specialist cert. by Amer. Bd. of
Certification
>
>
>
Behalf Of
> t_mannis
> Sent: Thursday, December 18, 2008 6:32 PM
> To:
cdcbaa@yahoogroups.com
> Subject: [cdcbaa] Re: IRA Withdrawals/Taxes/Chap 7 Means Test
>
>
>
> Hi David:
>
> I only wish they were loan proceeds. These were absolutely
> withdrawals. The 8th Circuit case I came across was the following:
>
>
http://www.mow.
>
> uscourts.gov/opinions/bankruptcy/bap/066072Pa.pdf
>
> To quote from the opinion:
>
> "An IRA, or individual retirement account, is a trust created in
the
> United States for the benefit of the creator or his beneficiaries,
> provided that the written instrument creating the trust meets
certain
> requirements. 26 U.S.C. 408(a). Bankruptcy courts that have
> considered whether IRA distributions should be included in current
> monthly 7 income have found that distributions from IRAs should be
> excluded because the money deposited into an IRA is received for
use
> prior to the distribution from the IRA. See Simon v. Zittel (In re
> Zittel), 2008 WL 750346 (Bankr. S.D. Ill. 2008); In re Wayman,
> 351 B.R. 808 (Bankr. E.D. Tex. 2006). We agree with the bankruptcy
> courts in Zittel and Wayman. Given the attributes of an IRA, we
> conclude that IRA distributions should not be treated as income for
> purposes of the means test."
>
> Putting that aside for one second, what is your take on the tax
> issues? As mentioned, he hasn't paid taxes on the withdrawals YET,
> but we know he WILL have to. I'm assuming that I can't put that
> into "necessary expenses - taxes" since it hasn't occurred yet. On
> the other hand, we know that the net received will end up being
> significantly less.
>
> Todd Mannis, Esq.
>
> --- In cdcbaa@yahoogroups.
com, "David A.
> Tilem"
> wrote:
> >
> > Todd:
> >
> > Are the IRA disbursements loans or withdrawals? Per the US
> Trustee, loan
> > proceeds are NOT counted. Distributions or withdrawals ARE
> counted.
> >
> > David A. Tilem
> > Certified Bankruptcy Specialist*
> > Law Offices of David A. Tilem (a debt relief agency)
> > 206 N. Jackson Street, #201, Glendale, CA 91206
> > Tel: 818-507-6000 Fax: 818-507-6800
> >
> > * Bankruptcy specialist cert. by State Bar of CA Bd of Legal
> > Specialization.
> > Business bankruptcy specialist cert. by Amer. Bd. of
> Certification
> >
> >
> >
> [mailto:cdcbaa@yahoogroups. com]
On
> Behalf Of
> > t_mannis
> > Sent: Thursday, December 18, 2008 1:57 PM
> > To: cdcbaa@yahoogroups. com
> > Subject: [cdcbaa] IRA Withdrawals/Taxes/Chap 7 Means Test
> >
> >
> >
> > Client has had virtually no employment income in the past six
> months,
> > but has lived off of IRA withdrawals. The amount drawn out in the
> last
> > six months is putting him just over as far as qualifying for the
> means
> > test. I know that in the 8th Circuit, their BAP ruled in a case
> Zahn
> > v. Fink that as far as IRA withdrawals are concerned, IRA
> withdrawals
> > are not income. Unfortunately, unless I am mistaken (and
hopefully
> I
> > am), our own 9th Circuit has not yet ruled the same.
> >
> > So, assuming I am stuck with this as income, the question is with
> > regard to taxes. We all know that the Debtor WILL be taxed on
these
> > withdrawals; the fact is that this hasn't happened as of YET. Is
> there
> > any way I can include the taxes under "necessary expenses -
taxes"
> on
> > the means test? If so, problem solved. OR, since those taxes were
> not
> > in fact paid within the applicable 6 month period, am I
foreclosed
> from
> > using this as a deduction? Obviously once taxes are factored in,
> the
> > amount would be significantly less.
> >
> > Todd Mannis
> >
>
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