In Mallo v. Internal Revenue Service, decided on Dec. 29, 2014, the Tenth Circuit Court of Appeals ruled that Edison and Liana Mallo’s 2000 and 2001 tax debt was not dischargeable in bankruptcy, notwithstanding their filing of tax returns for those years—although admittedly they filed late. Nevertheless, this result seems to run counter to the expressed intent of the Bankruptcy Code. More to the point, it will drive a stake through the heart of any attempt by a delinquent taxpayer to “clean his slate” through the use of bankruptcy.
The Mallos did not file timely federal income tax returns for 2000 and 2001 and were issued a statutory notice of deficiency by the IRS, assessing $34,464 in taxes including penalties and interest for 2001, and $19,022 in taxes for the year 2000. Assessments were made in 2005 and 2006, and in 2006 the IRS began collection efforts.
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