Summary:
In an alcoholic functions adequately in his profession or business, IRS won't excuse him from filing a tax return and so his taxes won't be discharged in bankruptcy.

For more than a decade, Dr. W. David Fretz operated pickled in alcohol.

He drank a quart of expensive vodka every night before passing out. His personal life deteriorated, but he managed to keep his problem from patients and staff at the Alabama hospital where he worked.

The day of reckoning, Fretz always knew would come, arrived when he received a letter from the Internal Revenue Service.

Three years later, Fretz joined Alcoholics Anonymous, regained control of his life and stopped drinking. He marked the day he put down the bottle: April 15.

Celebrating his victory must have kept him from filing a return on that day, but why hadn't he sent returns for the prior nine years?

To discharge his tax debt of more than $1 million, the doctor filed for bankruptcy.

To the surprise of tax experts and the IRS, the court said alcoholism impaired him so much he couldn't prepare returns. The judge gave these reasons for allowing the doctor off:

• He took no active interest in any financial matters.
  
• He didn't live lavishly or accumulate wealth.
  
• He didn't destroy or hide records.
  
• He didn't attempt to hide assets, like in offshore accounts.
  
• He worked with the IRS to prepare his returns.
  

Tax professionals began to think God looks out for fools and drunks--and sometimes the courts do, too.

But wait, the story isn't over. The IRS appealed. The higher court explained its position: The "fresh start" policy of discharging debts in bankruptcy is available only to the "honest, but unfortunate debtor." If a person by mistake fails to file, taxes might be discharged, but if it's willful, they won't. With Fretz, he knew he had an obligation: He testified the obligation weighed so heavily, the IRS became his life's focus.

Reversing the lower court, the appeal's court refused to discharge the debt. It added: "Someone who can control his drinking enough to perform emergency room medical procedures for years can control his drinking enough to file returns and pay taxes."

THE MORAL: It never pays to drown your tax trouble in a bottle.

More at Returns.