                                                                NOT PRECEDENTIAL

                    UNITED STATES COURT OF APPEALS
                         FOR THE THIRD CIRCUIT
                            ________________

                                    No. 11-1616
                                 ________________

                              IN RE: BRUCE BRYEN,
                                               Debtor.

                                  BRUCE BRYEN,
                                                   Appellant.
                                         v.

                          UNITED STATES OF AMERICA
                               ________________

                 On Appeal from the United States District Court
                    For the Eastern District of Pennsylvania
                          (D.C. Civ. No. 2-10-cv-05030)
                 District Judge: Honorable J. William Ditter, Jr.
                               ________________

                  Submitted Under Third Circuit L.A.R. 34.1(a)
                               October 5, 2011

    BEFORE: McKEE, Chief Judge, FUENTES and GREENBERG, Circuit Judges

                          (Opinion Filed: November 4, 2011)
                                 ________________

                             OPINION OF THE COURT
                                ________________

FUENTES, Circuit Judge.




                                         1
           Appellant Bruce Bryen filed for bankruptcy pursuant to Chapter 7 of the

Bankruptcy Code. In his bankruptcy schedules, Bryen included a $19 million general

unsecured debt for unpaid taxes, and subsequently initiated an adversary proceeding to

discharge the debt. The Bankruptcy Court found the debt non-dischargeable and the

District Court affirmed. He timely appealed. 1

           We will affirm.

                                                            I.

           Because we write for the parties, we discuss the facts only to the extent necessary

for the resolution of the issues raised on appeal. Bryen is a licensed Certified Public

Accountant (“CPA”) with over 35 years of experience. In the late 1970’s and early

1980’s, he co-owned an accounting firm with his father that created and promoted tax

shelters involving employee leasing partnerships. In addition to recommending these tax

shelters to his clients, Bryen personally invested in them and claimed them as deductions

on his tax returns.

           The IRS disallowed the deductions and issued notices of deficiency, which Bryen

challenged in the United States Tax Court. The Tax Court concluded that Bryen’s

employee leasing partnerships and related tax shelters were “shams” because they

“present[ed] only an image of genuine lending, borrowing, and investment transactions.”

Bealor v. Commissioner, 72 T.C.M. (CCH) 730, (1996). However, the Tax Court did not

determine the precise amount of Bryen’s tax deficiency and for five years after that,

Bryen received no information from the IRS regarding how much he owed. In summer

1
    We have jurisdiction over the District Court’s final order pursuant to 28 U.S.C. § 1291.

                                                            2
of 2001, the IRS contacted him and in summer of 2002, he stipulated to owing

approximately 13 million dollars.

       Notwithstanding his stipulations and huge debt, Bryen failed to make any

payments toward his outstanding tax liabilities. In 2004, he filed a petition for

bankruptcy under Chapter 7 of the Bankruptcy Code. According to the Bankruptcy

Court, “[a]t no time during the pendency of the bankruptcy case did the IRS or [Bryen]

file a complaint to determine the dischareability of the [t]ax [d]ebt.” In re Bryen, 433

B.R. 503, 506 (Bankr. E.D. Pa 2010). In September 2004, Bryen’s bankruptcy case was

closed. Nearly three years later, the IRS began a collection action against Bryen to

collect his unpaid taxes. In response, Bryen filed a motion in the Bankruptcy Court to

reopen his bankruptcy case “so that he could initiate an adversary proceeding to obtain a

determination of the dischargeability of the [t]ax [d]ebt.” Id. The Bankruptcy Court

granted his request and Bryen filed an adversary complaint against the IRS. Ultimately,

the Bankruptcy Court determined that Bryen’s tax debt was not discharged in the initial

bankruptcy proceeding and that his adversary complaint failed to set forth sufficient

grounds for dischargeability because Bryen had willfully attempted to evade his tax

liability under Section 523(a)(1)(C) of the Bankruptcy Code

       It is worth noting that despite his bankruptcy proceeding and substantial tax

burden, Bryen lived a comfortable lifestyle. The Bankruptcy Court found that Bryen paid

half of all his household expenses on homes solely owed by his wife and paid half of the

cost of substantial improvements on those homes. Bryen, 433 B.R. at 514. The court

also found that he paid for half, along with his wife, of the expenses for multiple

                                              3
vacations to foreign countries such as Costa Rica, Panama City, France, Australia, Italy,

Austria, Germany, Switzerland, and Mexico, all the while staying at expensive hotels. Id.

In the decade between the Tax Court’s decision and the Bankruptcy Court’s

determination that the debt was nondischargeable, Bryen did not make a single payment

to reduce his tax debt nor did he save any money to do so. 2

                                                        II.

        When a debtor files a petition under Chapter 7 of the Bankruptcy Code, the debtor

is generally granted a discharge from all debts arising prior to the filing of the bankruptcy

petition. 11 U.S.C. § 727(b) (1994); see also In re Birkenstock, 87 F.3d 947, 950 (7th

Cir. 1996); In re Toti, 24 F.3d 806, 808 (6th Cir. 1994). This remedial policy applies

only to the “honest but unfortunate debtor.” Grogan v. Garner, 498 U.S. 279, 286-287

(1991).

        A debtor who willfully evades a tax is not entitled to a discharge of that debt.

Section 523(a)(1)(C) provides:


        (a) A discharge under section 727 … of this title does not discharge an individual
            debtor from any debt—
        (1) For a tax or a customs duty –
        (C) with respect to which the debtor made a fraudulent return or willfully
        attempted in any manner to evade or defeat such tax.

11 U.S.C. § 523(a)(1)(C).




2
   “[W]e review the bankruptcy court’s findings by the standards the district court should employ, to determine
whether the district court erred in its review.” In re Fegeley, 118 F.3d 979, 982 (3d Cir. 1997) (quoting Universal
Minerals, Inc. v. C.A. Hughes & Co., 669 F.2d 98, 102 (3d Cir. 1981)). We review facts under the clearly erroneous
standard and review conclusions of law de novo. Id.


                                                         4
         The Government has the burden of proving beyond a preponderance of the

evidence that Bryen willfully attempted to evade his taxes. In re Fegeley, 118 F.3d 979,

983 (3d Cir. 1999). First, the Government must show that Bryen’s conduct sufficiently

demonstrates that he was attempting to evade his taxes. Id. There is no specific conduct

that constitutes evasion, rather we look at the totality of the circumstances. Id. Although

non-payment alone does not constitute evasion, it is relevant evidence. Id.

         Second, the Government must show that Bryen’s attempt to evade his taxes was

“willful.” Id. A debtor evades his taxes willfully when it is “voluntary, conscious, and

intentional.” Id. at 984. Therefore, to prevail, the Government need only establish that

(1) the debtor had a duty to file income tax returns; (2) the debtor knew he had such a

duty; and (3) the debtor voluntarily and intentionally violated that duty. Id.

         Once the Tax Court held that his tax shelters were shams, Bryen was aware he

owed back taxes to the IRS. While he did not know the specific amount of the tax

deficiency until 2001, he was aware that it would be substantial. Nonetheless, Bryen

continued to live high on the hog. He earned income that exceeded his modest, fixed

living expenses. He made no attempt to save in anticipation of the tax debt. Further,

after he signed the stipulations with the IRS, he did not change his behavior. He did not

make any payments to the IRS to reduce his tax liability and continued to deal in cash to

avoid having creditors attach his bank accounts. 3 Thus, the totality of the circumstances

justify finding that he was attempting to evade his taxes under § 523(a)(1)(C).

3
         Bryen contends that he only dealt in cash to avoid attachment by creditors other than the IRS and thus this
should not weigh towards finding evasion. We disagree. The system Bryen devised to avoid his other creditors
served precisely the same function as to the IRS.

                                                          5
       Bryen argues that he did not “willfully” evade an assessed tax, because the IRS

did not assess the tax until 2002. However, Section 523 only references taxes, not

assessed taxes and a delay in enforcement cannot mean that a taxpayer, aware that he

owed the IRS a substantial sum, can never have the requisite intent to evade. As the

Bankruptcy Court noted, “it is hard to imagine that the outstanding tax debt did not loom

over [Bryen] like a ‘Sword of Damocles.’” In re Bryen, 433 B.R. 503, 519 (Bankr. E.D.

Pa. 2010). Yet, unlike the Damocles of legend, Bryen never sought to give up his

lifestyle to free himself of this sword. His lifestyle, combined with his deliberate

attempts to avoid his creditors, justifies the Bankruptcy Court’s finding that he acted

intentionally and voluntarily in evading his tax obligations. See In re Fegeley, 188 F.3d

at 984 (finding that the Debtor’s evasion was willful when he “probably had enough

money to pay th[e] taxes[,]… spent too much[,] … was much too lavish[, and] … didn’t

make good judgments about the allocations of his resources.”); see also In re Gardner,

360 F.3d 551, 561 (6th Cir. 2004) (finding the taxpayer’s lifestyle which included

numerous vacations coupled with his lack of payment of his tax debt suggested a willful

evasion of the tax debt).

       Thus, the District Court properly affirmed the Bankruptcy Court’s decision that

Bryen willfully attempted to evade a tax and that his tax debt was not dischargeable in

bankruptcy.

                                                 IV.

       For the foregoing reasons, we affirm the District Court.



                                             6
