United States v. McCann
United States v. B. W. McCANN, aka Bert Walter McCann
- Proceeding
- district
- Area
- probate
- Panel
- Jesse W. Carter (author)
Analysis
The government moved for partial summary judgment arguing that its tax lien was timely filed within the six-year statute of limitations, while the defendants argued the period was suspended because their homestead property was in the custody of the bankruptcy court. The court denied the motion, holding that the property was in the custody and control of the court during the exemption determination, which suspended the limitations period and rendered the lien timely.
| What the court decided | The model |
|---|---|
Motion for partial summary judgment denied“The collection was begun within six years and six months of assessment and the motion for partial summary judgment should be and is hereby denied.” | agree with court The court correctly applied the statutory suspension provision of 26 U.S.C. § 6503(b). The record establishes that the property was claimed as exempt and set aside by the bankruptcy court. Under the cited authorities, specifically Chicago, Burlington & Quincy RR v. Hall, the property passes to the trustee for the purpose of segregation and appraisal, meaning the bankruptcy court retains custody and control over the property during the exemption determination process. Because the property was in the custody of the court, the statute of limitations was suspended for the duration of that custody plus six months. Since the lien was filed just over six years after assessment, the suspension period covers the gap, making the filing timely. The reasoning is sound and supported by the cited case law. |
The order itself: sound — The order is sound. It correctly identifies the relevant statutory provision for suspending the statute of limitations and applies established Supreme Court and Ninth Circuit precedent to determine that the bankruptcy court retained custody and control over the homestead property during the exemption determination process. The factual finding that the property was claimed as exempt and set aside by the bankruptcy court is sufficient to trigger the suspension under 26 U.S.C. § 6503(b). The logic flows directly from the cited authorities to the conclusion that the lien was timely.
Opinion — Carter
MEMORANDUM OF DECISION
JAMES M. CARTER, Chief Judge.
26 U.S.C. § 6503(b), states that the period of limitations “shall be suspended *633for the period the assets of the taxpayer are in the control or custody of the court in any proceeding before any court of the United States * * * and for 6 months thereafter.” In the present case the government filed its lien just over six years from the date of assessment so that if the exempt property ever was in the “custody and control” of the bankruptcy court, the additional six month period will protect the government.
The section leaves much to be desired in definiteness and clarity, and various situations may be spelled out in which real problems would arise. However, in the present case the factual situation is clear. The defendants, Mr. and Mrs. Mc-Cann claimed as exempt in a bankruptcy proceeding, a parcel of real property which they had homesteaded and it was set aside to them as exempt by the bankruptcy court.
The trustee takes title to all property of the bankrupt except exempt property. Bankruptcy Act § 70, 11 U.S.C. § 110. But the Bankruptcy court still must determine if the property is exempt.
“It is true that title to exempt property does not vest in the trustee, and cannot be administered by him for the benefit of the creditors. But it can ‘pass to the trustee as a part of the estate of the bankrupt,’ for the purposes named elsewhere in the statute, included in which is the duty to segregate, identify, and appraise what is claimed to be exempt. * * * In other words, the property is not automatically exempted, but must “pass to the trustee as a part of the estate,” * * * not to be administered for the benefit of creditors, but to enable him to perform the duties incident to setting apart to the bankrupt what, after a hearing, may be found to be exempt. Custody and possession may be necessary to carry out these duties * * * ” Chicago, Burlington & Quincy RR v. Hall, 229 U.S. 511, 515, 516, 33 S.Ct. 885, 886, 887, 57 L.Ed. 1306 (1913).
It is therefore possible for the Bankruptcy court to have control over the property even though the trustee does not have title. As stated by the Ninth Circuit: “The fact that the act conferred on the bankruptcy court authority to control exempt property, in order to set it aside, does not mean that the court can administer it as an asset of the estate.” Baumbaugh v. Los Angeles Morris Plan Co., 30 F.2d 816 (9th Cir. 1929).
The Bankruptcy court therefore had custody and control of the homesteaded property for purposes of determining the exemption. This would fall under the proviso in 26 U.S.C. § 6503(b) and give the government another six months to collect the taxes. The collection was begun within six years and six months of assessment and the motion for partial summary judgment should be and is hereby denied.