One of the mysteries of the universe (well, sorta) was answered for me by my least favorite authority.
The United States Trustee wanted to adjust the taxes incurred on the bankruptcy means test form to be taxes as they were projected to be in the future.
Fine by me.
My position has always been that current monthly income is the only part of the means test calculation that was determined by looking backward.
By statute, Congress defined “current monthly income” to be backward looking. (Conclude what you will about Congress.)
(A)means the average monthly income from all sources that the debtor receives (or in a joint case the debtor and the debtor’s spouse receive) without regard to whether such income is taxable income, derived during the 6-month period ending on (i) the last day of the calendar month immediately preceding the date of the commencement of the case if the debtor files the schedule of current income required by section 521(a)(1)(B)(ii); 11 U.S.C. 101(10A)
However, expenses for means test purposes remained forward looking.
So, if the debtor expected to surrender real estate and lose the interest deduction, their taxes should be calculated, not on what they might owe this year, when they still had the deduction, but looking forward to their tax obligation post surrender of the property.
Others have wondered whether the taxes ought to travel with the income in the look back period. At some level, that’s logical, since it defines how much income the debtor has that is disposable, in the broadest sense.
[If you’ve followed my views on the means test, you will know that any argument about the means test based on logic is per se faulty!]
In my recent case, the UST stated clearly that taxes were a forward looking expense.
Of course in my case, where I had increased the tax burden to reflect the fact that in the current year, the debtors had not paid all of the mortgage interest due and would therefore have a smaller deduction than in past years, the UST wanted to look further forward to years in which they would be paying mortgage interest as it came due.
You had to know that any little victory would be diluted by the UST’s world view, didn’t you?
More on taxes and the means test
Image courtesy of Livius.org