The Internal Revenue Service ("IRS") assessed additional taxes and penalties against the Debtor Harold Jung ("Debtor"). The Debtor filed an adversary proceeding seeking to determine the amount of additional taxes owed and the dischargeability of additional taxes owed, if any. The IRS moved to dismiss for lack of subject-matter jurisdiction under Federal Rules of Civil Procedure 12(b)(1) and 12(h)(3). The Court held it had subject-matter jurisdiction under 28 U.S.C. § 157. That section allows district courts to refer to bankruptcy courts any or all cases under Title 11 and any or all proceedings arising under, arising in, or related to a case under Title 11. The Court relied on two principal reasons for invoking jurisdiction: (1) section 505(a) of the Code authorizes bankruptcy courts to determine the amount or legality of any tax, and (2) "core proceedings" include "determinations as to the dischargeability of particular debts." In addition, the court declined to abstain from exercising jurisdiction under 28 U.S.C. § 1334(c)(1) because it would be inefficient and prejudicial to require the Debtor to litigate in Tax Court and then potentially litigate similar facts a second time in Bankruptcy Court.
11 U.S.C. § 505(a) -- Determination of Tax Owed
28 U.S.C. §§ 157(a), 1334(b) -- Jurisdiction
28 U.S.C. § 1334(c)(1) -- Abstention from Jurisdiction
Fed. R. Civ. P. 12(b), 12(h) -- Motion to Dismiss
Determination of Taxes Owed