                                                                                    PUBLISH

                  IN THE UNITED STATES COURT OF APPEALS

                            FOR THE ELEVENTH CIRCUIT        FILED
                                 _______________    U.S. COURT OF APPEALS
                                                                     ELEVENTH CIRCUIT
                                                                         12/09/99
                                       No. 99-10668
                                                                      THOMAS K. KAHN
                                     _______________                      CLERK

                              D. C. Docket No. 98-56-CV-3



IN RE: COSTAS J. GUST,
                                                   Debtor.

COSTAS J. GUST,
                                                   Plaintiff-Appellant,

       versus

UNITED STATES OF AMERICA, acting by and
through the Internal Revenue Service,

                                                   Defendant-Appellee.

                          ______________________________

                      Appeal from the United States District Court
                         for the Southern District of Georgia
                        ______________________________
                                 (December 9, 1999)

Before BIRCH and HULL, Circuit Judges and HODGES*, Senior District Judge.



       *
         Honorable William Terrell Hodges, Senior U.S. District Judge for the Middle District of
Florida, sitting by designation.
PER CURIAM:

      We adopt the well-reasoned and thorough opinion of the district court in this

case. The opinion of the district court is annexed hereto.

      AFFIRMED.




                                          2
               IN THE UNITED STATES DISTRICT COURT
              FOR THE SOUTHERN DISTRICT OF GEORGIA
                         DUBLIN DIVISION


IN RE:                        *
COSTAS J. GUST,               *    Chapter 13 Case,
                              *    No. 97-30457
     Debtor.                  *
______________________________*
                              *
                              *
COSTAS J. GUST,               *
                              *
     Appellant,               *
                              *
v.                            *    CIVIL ACTION
                              *    CV 398-56
UNITED STATES OF AMERICA      *
acting by and through the     *
INTERNAL REVENUE SERVICE,     *
                              *
     Appellee.                *
                            _________

                            O R D E R
                            _________


     The Appellant, Costas J. Gust, appeals the Bankruptcy Court’s
Order, In re Gust, 229 B.R. 44 (Bankr. S.D. Ga. 1998), overruling

his objection to the Claim of the United States of America acting

by and through the Internal Revenue Service (IRS). Jurisdiction to

hear this appeal exists pursuant to 28 U.S.C. § 158 (a)(1).   Upon

review of the proceedings in the court below, the briefs submitted

by the parties, and relevant statutory and case law, the Order of

the Bankruptcy Court is hereby AFFIRMED.

                          I. BACKGROUND

     The facts in this case are not in dispute.   During the 1980s,

Costas J. Gust (Gust), was an officer of Con-Fleet Enterprises,

Inc. (Con-Fleet).   From June 1986 to March 1989, Con-Fleet failed
to pay all of its Form 941 federal employment tax obligations.

Con-Fleet went out of business.           Because Gust was a responsible

officer, on May 25, 1989, the IRS assessed a Trust Fund Recovery

Penalty against him pursuant to Section 6672 of the Internal

Revenue   Code.      This   penalty   was   assessed   in   the   amount   of

$18,413.85, plus statutory interest.         Subsequently, on August 16,

1989, the IRS filed a Notice of Federal Tax Lien against Gust’s

real and personal property.

     On August 29, 1994, Gust filed for Chapter 7 bankruptcy

protection, Case No. 94-30233, in the United States Bankruptcy

Court for the Southern District of Georgia.            At the time of the

filing, Gust did not own any real property, but he did list on his

bankruptcy schedules $19,821.00 in personal property, all of which

was exempt.       Thus, as a no asset case, the creditors were not

required to file claims.      Gust received a discharge on February 9,

1995.

     On April 13, 1995, the IRS filed a corrected Notice of Federal

Tax Lien with respect to the original lien.                 This correction

extended the effective period of the lien from six years to ten

years, making the lien effective through June 24, 1999.

     Two years later, Gust filed the current Chapter 13 bankruptcy

case.   Again, Gust did not list any real property on his bankruptcy

schedules.    Gust, however, listed $51,420.00 in personal property

of which he claimed exemptions totaling $47,320.00. The IRS timely

filed a proof of claim on December 16, 1997, and amended the claim

on May 29, 1998.     In the amended proof of claim, the IRS listed a


                                      2
secured claim for $50,255.83 and an unsecured priority claim for

$2,356.43 with a total claim for $52,612.26.                 The secured claim

included the Trust Fund Recovery Penalty of $18,413.85, plus

accrued interest in the amount of $31,841.98.

     Gust filed an objection to the IRS’s claim contending that the

claim    was   discharged    in   the    Chapter   7     petition   because   the

Bankruptcy Code § 523(a)(1)(A) 1 only excepts from a Chapter 7
                                                                              2
discharge      debts   for   taxes      as   specified    in § 507(a)(8).

Specifically, Gust argued that the secured debt was discharged

because § 507(a)(8) only excepts unsecured claims.              The Bankruptcy

Court disagreed.       This appeal followed.
                                  II. ANALYSIS

     On appeal, this Court cannot set aside factual findings of the

Bankruptcy Court unless they are clearly erroneous.                  Bankruptcy

Rule 8013; In re Club Assocs., 951 F.2d 1223 (11th Cir. 1992).
However, legal conclusions by the Bankruptcy Court are reviewed by



     1
       11 U.S.C. § 523(a)(1)(A) provides:
     (a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of
     this title does not discharge an individual debtor from any debt--
           (1) for a tax or a customs duty--
                 (A) of the kind and for the periods specified in section
                 507(a)(2) or 507(a)(8) of this title, whether or not a claim
                 for such tax was filed or allowed;
     (emphasis added).
     2
       11 U.S.C. 507(a)(8)(c) provides:
     (a) The following expenses and claims have priority in the
     following order ...
          (8) Eighth, allowed unsecured claims of governmental
          units, only to the extent that such claims are for--....
               (C) a tax required to be collected or withheld and
               for which the debtor is liable in whatever
               capacity.
     (emphasis added).

                                         3
this Court de novo.       Id. at 1228; In re Thomas, 883 F.2d 991 (11th

Cir. 1989).

A. DISCHARGEABILITY       OF TAX DEBTS UNDER 11 U.S.C. § 523

     Gust argues that the Bankruptcy Court erred in concluding that

§ 523 (a)(1)(A) excepts secured claims from discharge. Section 727

of the Bankruptcy Code provides that, “except as provided in

section 523 of this title, a discharge under subsection (a) of this

section discharges the debtor from all debts that arose before the

date of the order for relief under this chapter.” 11 U.S.C. §

727(b).     Under section 523 of the Bankruptcy Code, “ a discharge

under section 727 . . . of this title does not discharge an

individual debtor from any debt . . . for a tax . . . of the kind

and for the periods specified in section 507(a)(2) or 507(a)(8) of

this title, whether or not a claim for such tax was filed or

allowed.” Id. at § 523(a)(1)(A).           In other words, these sections

clearly    state   that   taxes   listed   in   §§   507(a)(2);(8)   are    not

discharged.

        Section 507 of the Bankruptcy Code establishes priorities for

claims and expenses.       Id. at § 507(a).      Specifically, § 507(a)(8)

gives    eighth-level priority to “        allowed    unsecured    claims    of

governmental units, only to the extent that such claims are for .

. . (C) a tax required to be collected or withheld and for which

the debtor is liable in whatever capacity.” Id. at § 507(a)(8)(C)

(emphasis added).     The Trust Fund Recovery Penalty for employment

taxes is a “tax of the kind” found in § 507(a)(8)(C).             In re Haas,

162 F.3d 1087, 1089 (11th Cir. 1998).


                                      4
     Gust premises his objection and appeal on the grounds that

because the IRS’s claim was secured, the claim did not qualify as

an exception to discharge because the introductory clause in

§ 507(a)(8) only references “allowed unsecured claims.”                 In this

regard, Gust argues that the IRS would only be able to recover

unsecured claims, not the secured claim it is seeking.                 Although

this position seems illogical, Gust has found nonbinding legal

support for his claim.     In support of his position, Gust relies on

the Tenth Circuit Court of Appeals opinion in United States v.

Victor,     121 F.3d 1383 (10th Cir. 1997).              The Tenth Circuit in

Victor held that by virtue of the introductory language in §

507(a)(8), § 523(a)(1)(A) includes only allowed unsecured claims

for dischargeability purposes.

     Victor was an appeal of two consolidated Chapter 11 bankruptcy

cases concerning the issue of whether the IRS was entitled to post-

petition, pre-confirmation interest on its secured claims--commonly

referred to as “gap period interest.”             In both cases, assets were

available for partial satisfaction of the secured creditors.                 The

IRS participated in the confirmed plans but did not assert claims

for gap period interest.         Subsequently, the IRS informed the

debtors   that   they   were   liable       for   gap   period   interest.    In

response, the debtors filed declaratory judgments in the bankruptcy

court seeking a determination as to their liability for that

interest.

     The court of appeals conducted a statutory analysis of both

§ 523(a)(1)(A) and § 507(a)(8) and recognized that linguistic

                                        5
imperfections arise with the interplay of the two statutes.               The

Victor court acknowledged that § 523(a)(1)(A) expressly provides

that the taxes are not dischargeable whether or not a claim for

such tax was filed or allowed.        The court also recognized that the

introductory clause in § 507(a)(8) only excepts allowed claims,

which conflicts with § 523(a)(1)(A).             Nevertheless, the     Victor

court    ignored    this   conflict       and   applied    the     “unsecured”

introductory language to § 523(a)(1)(A) dischargeability.             Instead

of focusing on the type of “tax”, the Victor court focused on the

type of “claim.”     This focus was in error.

     Focusing on the type of claim ignores the express language

concerning whether a claim is “allowed.”           In choosing to focus on

the type of claim mentioned in the introductory language, the

Victor court noted that the Eleventh Circuit Court of Appeals
reached the opposite conclusion in In re Gurwitch, 794 F.2d 584

(11th Cir. 1986). Gurwitch similarly involved a claim made by the

IRS after the confirmation of a Chapter 11 plan.            The Victor court

stated that the Eleventh Circuit “never considered the introductory

language   of   §   507(a)(7)   and   thus      avoided   th[is]   linguistic

peril[].”3 Victor, 121 F.3d at 1388.              One could easily argue,

however, that the Eleventh Circuit did not avoid a linguistic

peril, but instead, the Tenth Circuit created one by its focus on

the type claim.




     3
      Section 507(a)(7) was renumbered as section 508(a)(8) by the
Bankruptcy Reform Act of 1994.

                                      6
      The   Bankruptcy      Court,    however,       evaluated     these   seemingly

inconsistent statutes in its Order and stated that

      [t]he status of any possible claim for this debt in the
      Debtor's   chapter    7    case   is    irrelevant    for
      dischargeability purposes.
           “The plain meaning of legislation should be
      conclusive, except in the rare cases in which the literal
      application of a statute will produce a result
      demonstrably at odds with the intentions of its
      drafters.” There is no ambiguity in § 523(a)(1)(A).
      Section 523(a)(1)(A) addresses "debt" arising from "a
      tax", "of the kind" specified in § 507(a)(8), not debt
      evidenced by a claim described in § 507(a)(8).

In re Gust , 229 B.R. 44, 47 (Bankr. S.D. Ga. 1998) (internal

citations omitted).

      The Bankruptcy Court’s decision is consistent with other

opinions addressing this issue. In re Frengel, 115 B.R. 569, 571
(Bankr. N.D. Ohio 1989) (finding that a secured tax claim under §

523(a) is not discharged under § 727(a)); In re Latulippe, 13 B.R.

526   (Bankr.    D.   Vt.    1981).     “While       Sec.    507(a)(7)     refers   to

'unsecured claims', Congress did not intend to make unsecured

claims for taxes nondischargeable and render taxes dischargeable

where   the     government    has     imposed    a    lien    on   the     taxpayers'

property.” Frengel, 115 B.R. at 571.             “Congress stated: Whether or

not the taxing authority's claim is secured will also not affect

the claim's nondischargeability if the tax liability in question is

otherwise entitled to priority.” Id. (citing                   S.Rep. No. 95-989,

95th Cong., 2d Sess. (1978) at pp. 77-78, U.S. Code Cong. & Admin.

News, 1978, pp. 5787, 5863).          Similarly, the Latulippe court stated

the it is illogical that Congress intended to make unsecured claims

nondischargeable while rendering a claim dischargeable if the

                                         7
government has sought to enforce payment by creating a lien. In re

Latulippe, 13 B.R. at 527.

        While the Bankruptcy Code generally favors a fresh start,

"Congress has made the choice between collection of revenue and

rehabilitation of the debtor by making it extremely difficult for

a debtor to avoid payment of taxes under the Bankruptcy Code." In

re Gurwitch, 794 F.2d at 585-86.       Gust’s position contravenes this

policy and would result in illogical outcomes.            Under Gust’s

reasoning, the tax debt would be nondischargeable only if the IRS

had done nothing to secure the tax debt because it would be

“unsecured” under § 507(a)(8). Here, the Bankruptcy Court was

correct in concluding that “Section 523(a)(1)(A) addresses 'debt'

arising from 'a tax', 'of the kind' specified in § 507(a)(8), not

debt evidenced by a claim described in § 507(a)(8).”       In re Gust,
229 B.R. at 47.
                            III. CONCLUSION

        Upon the foregoing it is hereby ORDERED the Bankruptcy Court’s

Order dated September 28, 1998 is AFFIRMED.

     ORDER ENTERED at Augusta, Georgia, this _____ day of April,

1999.




                        __________________________________
                                  CHIEF UNITED STATES DISTRICT JUDGE




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