Eleventh Circuit Upholds Entireties Exemption of Income Tax Refund

Bankruptcy courts are split on the issue of whether a tax refund payable to a husband and wife filing a joint return is exempt tenants by entireties property in a Chapter 7 bankruptcy.

In March, 2013, I wrote a blog post  about a bankruptcy decision in the southern district of Florida bankruptcy courts that found that a joint tax return may not be entireties property. The married debtor in that case lost his share of his tax refund to the Chapter 7 trustee.

I recently found a case in the middle district which held that a debtor could exempt a joint tax refund check as entireties property. The court said that the policy expressed in the Florida Supreme Court’s Beal Bank decision creates a presumption that all joint marital property, including tax refunds, is owned tenants by entireties. The courts said that the Chapter 7 trustee has the burden to show that the debtor’s joint tax refund did not qualify as entireties property.

The court pointed to facts in the case showing an intent to own a refund by the entireties including that the debtors filed a joint tax return making the jointly and severally responsible for any tax liability and that the IRS check was payable to both of them jointly.

This case was appealed all the way to the Eleventh Circuit Court of Appeals. The District Court and the Eleventh Circuit upheld the bankruptcy court in a decision issued this month, August, 2013.

The post Eleventh Circuit Upholds Entireties Exemption of Income Tax Refund appeared first on Orlando Bankruptcy Law Blog.