In re Sand Rock Land Co.

Memorandum of Decision

In 1984, debtor Sand Rock Land Company (“Sand Rock”) paid substantial interest income to two note holders. At that time, 26 U.S.C § 6049(a) required it to file a return (1099 form) setting forth the amount of interest paid to each payee. The form also required the payee’s tax identification number. If the payee failed to provide the number, 26 U.S.C. § 3406 (a)(1)(D) required the person paying the interest to withhold 20 percent of the interest.

Sand Rock filed the required 1099 forms, but failed to include the payees’ identification numbers or withhold any tax. As a result, the IRS issued a tax assessment against Sand Rock in 1988 for $9,276.00.

In 1989, Sand Rock’s general partner, Robert McKee, sought to have the assessment abated. His application was denied because the tax had never been paid, which was a prerequisite to the relief sought. The matter remained dormant until 1998, when Sand Rock filed its Chapter 7 bankruptcy proceeding. The IRS has filed a claim for $9,276.00 in taxes *176 owed, plus $24,059.79 in interest and $10,-693.26 in penalties.

On October 7, 1999, this court granted summary judgment in favor if the IRS, overruling McKee’s…