Would a taxpayer's 1990 Chapter 7 discharge cover unreported tax if California was not scheduled or notified?

Plain-English summary

California legal staff preliminarily concluded that a taxpayer's 1990 Chapter 7 discharge probably did not cover unreported pre-petition tax if the Board was not listed as a creditor and received no notice.

The Board was preparing a determination covering 1980 through February 1990. The taxpayer admitted underreporting over several years. Staff relied on 11 U.S.C. section 523(a)(3), but expressly directed the district to inspect the bankruptcy records rather than assume what the schedules contained.

If the Board had been scheduled, the district was told to provide the details for a further opinion on whether any portion was discharged. The memorandum therefore gives a conditional process answer, not a final factual finding about the schedules.

Common questions

Did staff review the bankruptcy schedules?

No.

What did staff think was likely?

That the Board and the unreported liability were not scheduled.

What if California appeared in the schedules?

The district was instructed to seek further Legal Division advice.

Citations and references

• 11 U.S.C. section 523(a)(3) — unscheduled-debt discharge rule cited
• Fresno Bankruptcy Court records — source staff were directed to verify

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/170-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/170-0007.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Mr. David Rivera, Jr
Fresno District Office - DH

From:

Thomas Cooke, Staff Counsel
Legal Division – MIC:82

Subject:

DISCHARGE OF TAXPAYER IN BANKRUPTCY
J--- B--dba L---’S PLACE
ACCOUNT NO. SR --- XX-XXXXXX

170.0007

Date:

October 21, 1993

In our recent telephone conversation concerning the above taxpayer, you stated that the Board is in the process of issuing a determination for the period from January 1, 1980 to February 21, 1990. The taxpayer has provided information to the Board that he filed Chapter 7 bankruptcy in 1990, and was discharged from all dischargeable debts at that time. You ask if the discharge affects the determination that will be issued. The bankruptcy records should be consulted at the Fresno Bankruptcy Court. In all probability, the taxpayer did not “schedule” the Board as a creditor in his bankruptcy. In this event, the Board received no “notice” of the bankruptcy case and any pre-petition debt is not subject to discharge. 11 U.S.C. § 523(a)(3). Even if the taxpayer “scheduled” the State Board of Equalization as a creditor, the taxpayer, who admits underreporting over a period of years, probably did not “schedule” the unreported liability which forms the basis for the present liability. If the taxpayer did “schedule” the Board in his bankruptcy petition, please contact this office with the details and we will advise if any portion of the determination is deemed to be discharged.

TJC:plh