A Chapter 7 debtor, who was the chief financial officer of a limited liability company (LLC) that managed the daily activities of a bankrupt hospital, was a responsible person liable for the trust fund recovery penalty. The debtor was an officer and a board member of the hospital and he exercised significant control over the hospital’s financial affairs. He could sign checks, helped to prepare the hospital’s financial statements and tax returns, hired and supervised operating and financial officers of the hospital, and decided which of the hospital’s creditors were to be paid.
Further, the debtor also failed to demonstrate that the hospital’s funds were encumbered and, therefore, unavailable to pay the outstanding taxes. Although the hospital entered into a lock box arrangement with its creditor, the arrangement was informal and voluntarily. Also, the hospital entered into the arrangement despite knowing that the funds would not be available to satisfy the outstanding tax debt. Thus, the hospital’s lock box arrangement did not relieve the debtor of his obligation to ensure that the payroll taxes were timely paid to the IRS. (In re B.T. Cherne, BC-DC Ida., 2014-2 ustc ¶50,404.)
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