NORTHERN DISTRICT OF CALIFORNIA
|DO NOT PUBLISH
This case disposition has no value as precedent and is not intended for publication. Any publication, either in print or electronically, is contrary to the intent and wishes of the court.
LINDA GILBERT and THOMAS ROMANO, No. 00-11862
Memorandum of Decision
Shortly before they filed their Chapter 7 bankruptcy petition, the debtors sold some shares of
stock and put $10,361.71 into a SEP/IRA. The trustee objected to their claim of exemption on the
grounds that the amount exceeded the maximum allowable contribution. The parties stipulated to
reserved the issue until after the debtors filed their tax return.
When the return was filed, the debtors conceded that only $1,994.00 was exempt. They turned
over $3,935.00, which was the balance remaining in the account less the exempt amount of $1,994.00. (1)
The reason for the small amount turned over was that the value of the IRA had declined dramatically in
the nine months between the date of the filing and the date the tax return was filed.
The trustee seeks turnover of an additional $4,432.71. He calculates that amount by deducting
the $1,994.00 exemption and the $3,935.00 voluntarily paid by the debtors from the original
$10,361.71. In other words, he asserts that the debtors must absorb the loss entirely. The debtors
argue that they owe nothing, in essence arguing that the estate must absorb the entire loss. The court
finds that neither side is correct.
On the day of filing, the IRA contained $1,994.00 in exempt funds and $8,367.71 in non-exempt
funds. Thereafter, the fund declined 42% to $5,929.00. That means that the estate's share was then
$4,853.27 and the debtors' share was $1,075.73. Since the debtors paid the trustee $3,935.00, they
owe an additional $918.27.
Neither side has cited any cases directly on point. The only ruling of law which the court finds
necessary to make is that those cases which deal with appreciation of non-divisible assets such as real
estate are not applicable to situations involving losses where dollars, shares of stock, or other easily-divisible assets are concerned. In such cases, the debtor and the estate do not share ownership of
anything; each owns a certain amount of dollars or whatever, and must bear the losses on its share. (2)
Counsel for the trustee shall submit an appropriate form of order which counsel for the debtors
has approved as conforming to this memorandum.
Dated: September 17, 2001 ___________________________
U.S. Bankruptcy Judge
1. Apparently, there was no money in the SEP/IRA other than this $10,361.71 contribution.
2. The court might reach a different result where one side sought liquidation and the other side
refused. Those facts are not present