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Singer's fight to shed IRS debt in Chapter 7 faces new round

Dionne Warwick is famous for singing "Do You Know The Way to San Jose." More recently she has been looking to find out if there's anyone who knows the way to debt relief. It's a question many in Arkansas pose daily.

In Warwick's case, as readers of this blog may recall, the option being pursued is relief through Chapter 7 bankruptcy. She filed the necessary paperwork seeking protection earlier this year. This week, her case is scheduled for a round of action in court. The issue at the heart of the battle is whether the Internal Revenue Service is overstepping its authority by trying to tap two production companies for the estimated $7 million it says Warwick owes in taxes.

Apparently, the IRS has put the firms KMBA Productions and Star Girl Productions Inc. in its sights because of a belief that they belong to Warwick. In a recent filing, the agency asked the court's permission to recover the money it says Warwick owes from those operations.

Attorneys for Warwick say such a move should be denied. In replying to the IRS motion, they said their client holds neither an ownership stake in the companies, nor any position of control on their boards. Rather, they say they are administrative entities that merely pay her when she makes a singing appearance. Both sides are due to argue their points before a judge in New Jersey this week.

At a higher level, Warwick is seeking to have the tax burden the IRS claims she faces by having it discharged as part of her Chapter 7 bankruptcy petition. As we noted in our previous post, tax obligations can sometimes be subject to discharge under specific conditions.  

Warwick claims all those conditions have been met. Specifically, her side says that the tax issues stem from the 1980s and 90s when she was a victim of bad managers. Her lawyers say she has made good faith efforts over the subsequent decades to clear the matter up through negotiation and cooperation without success. So now she wants the bill discharged. 

Source: The Wall Street Journal, “Dionne Warwick Takes on the IRS,” Jacqueline Palank, June 10, 2013

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