Intel Free Press
The Internal Revenue Service asked a federal appeals court Thursday to reconsider its September ruling that allowed Electronic Arts founder William “Trip” Hawkins to avoid paying $26 million in California and federal taxes.
The IRS said that Hawkins is not qualified to enjoy the tax relief benefits from his 2006 bankruptcy. The taxing agency claims that Hawkins maintained a wealthy lifestyle ahead of his bankruptcy filing instead of satisfying his tax debt. But the 9th US Circuit Court of Appeals didn’t agree, and a three-judge panel of the San Francisco-based court ruled 2-1.
“A mere showing of spending in excess of income is not sufficient to establish the required intent to evade tax; the government must establish that the debtor took the actions with the specific intent of evading taxes,” the court said. “Indeed, if simply living beyond one’s means, or paying bills to other creditors prior to bankruptcy, were sufficient to establish a willful attempt to evade taxes, there would be few personal bankruptcies in which taxes would be dischargeable. Such a rule could create a large ripple effect throughout the bankruptcy system. As to discharge of debts, bankruptcy law must apply equally to the rich and poor alike, fulfilling the Constitution’s requirement that Congress establish ‘uniform laws on the subject of bankruptcies throughout the United States.'”
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