21 Apr Means Test Property Tax Arrears: Is Double Dipping Allowed on Lines 43 and 44?
In a consumer bankruptcy, the financial analysis contained on the means test form (Form B22A in chapter 7, Form B22C in chapter 13) can mean the difference between success and failure. In a close case, it may be necessary to take every possible deduction, to avoid having the means test show that the debtor has excessive disposable income. If the debtor owes past due property taxes on his or her homestead real estate, Lines 43 and 44 of Form B22A might be worth a second look, to avoid unnecessarily omitting a valid deduction.
Line 43 asks for one-sixtieth of any amount the debtor must pay to avoid repossession of property necessary for the support of the debtor’s household, in addition to the regular monthly deduction for such an expense contained on Line 42. This includes past due property taxes. If the debtor owes $3,000.00 for past due property taxes on his or her home, the debtor can take a deduction of $50.00 on Line 43 for curing these property tax arrearages.
Line 44 allows a deduction for one-sixtieth of priority claims, which includes property taxes incurred during the one year prior to the bankruptcy filing. If the debtor owes $3,000.00 in past due property taxes, he or she is allowed a deduction of $50.00 on Line 44, in addition to the $50.00 deducted on Line 43. Double dipping? Yes, but this double dipping is allowed by the language of Form B22A. In a close case, where every possible deduction must be claimed, consideration should be given to claiming this one twice, as Form B22A apparently allows.
Of course, it should be recognized that the U.S. Trustee might challenge the inclusion of the same property tax arrears on both Lines 43 and 44, claiming that duplication of expenses on Form B22A should be disallowed by the court. However, there are numerous deductions on Form B22A which are not based upon the reality of the debtor’s unique situation, such as food and clothing, transportation expenses, and deductions for secured debt payments on property to be surrendered. If Lines 43 and 44 literally ask the same expense twice, it is not for the courts to “second guess” Congress and edit the expense out of one of these two lines.
Additionally, the IRS Standards and the drafters of Form B22A have already anticipated which expenses on Form B22A should not be duplicated, which establishes by negative inference which ones may be duplicated. For example, the instructions to Line 25 (federal, state, and local taxes) state as follows: “Do not include real estate or sales taxes.” Additionally, the instructions to Line 32 (telecommunications expenses) state as follows: “Do not include any amount previously deducted.” This shows that Congress considered the issue of duplication of expenses, and where Form B22A does not prohibit duplication of expenses, it should be allowed.
In a close case, claiming the deduction for curing property tax arrearages on both Lines 43 and 44 of Form B22A may be warranted, if this is necessary to cause the debtor to pass the means test.
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