Bellus

Elizabeth Bellus appeals a grant of summary judgment in favor of the government in her suit for a refund of employment taxes. At issue are the validity of assessments for Social Security (FICA) and withholding taxes for periods ending June 30, 1989 and September 30, 1989; and for federal unemployment taxes (FUTA) for the period ending December 31,1989 (collectively “employment taxes”).

Bellus, as a sole proprietor, owned and operated Light Rail Manufacturing, which made plastic bags and containers. On May 30, 1989, she filed a petition for relief under Chapter 11 of the Bankruptcy Code. Commencing on that date she operated Light Rail as a debtor in possession. On August 21, 1989, Bellus’ Chapter 11 reorganization was converted to a Chapter 7 liquidation and Light Rail ceased business operations. No wages were paid following the conversion. Bellus was released from all dischargeable debts on December 29,1989.

In 1991, the IRS made assessments against Bellus for FICA taxes for the quarters ended June 30, 1989, and September 30, 1989 for $17,047.39 and $11,143.14 respectively. In 1992, the IRS made an additional assessment against Bellus for FUTA taxes for $2,205.26. In June or…