Tim’s Tax News on the Tenth – February 2026

Last month, I wrote that certain income taxes can be discharged in bankruptcy if they meet a four-part test, the last test being a subjective test. Well, on January 20, 2026, Judge Bentley of the United States Bankruptcy Court for the Southern District of New York issued a 46-page judgment determining that a chapter 7 debtor did not meet the fourth test. The IRS filed an adversary lawsuit to challenge the dischargeability of the Debtor’s almost $9 million in federal tax liabilities. The judge agreed that the liability was more attributable to the deliberate conduct of the debtor rather than financial misfortune.



The debtor, Jeffrey Winick, was one of New York City’s top commercial real estate brokers. As the CEO and majority owner of Winick Realty Group, LLC, he earned millions of dollars of cash compensation each year - an average of $4.75 million a year during the 2012 through 2016 tax years at issue in the adversary lawsuit. During and after that time, he spent lavishly, funding a luxurious lifestyle and incurring almost $12 million in gambling losses, while grossly underpaying his tax obligations. Following a decline in his brokerage business, initially caused by the loss of a key client and then exacerbated by the onset of the COVID-19 pandemic, he filed for Chapter 7 in August 2020. His bankruptcy schedules reported only $530,000 of assets and more than $10 million of debts, including almost $9 million in federal tax liabilities.

The Court found that rather than paying quarterly estimated taxes on his substantial commission income, the debtor directed that taxes be withheld only from his base salary, leaving millions in tax liabilities unpaid year after year. When the IRS attempted to collect, he repeatedly entered into installment agreements and submitted an offer-in-compromise—each of which temporarily barred enforcement—while allegedly misrepresenting that he had no income subject to estimated tax payments.

Looking at the facts, the judge held that nearly $9 million in federal income tax liabilities were not dischargeable because the debtor had willfully attempted to evade his taxes within the meaning of the Bankruptcy Code. The judge found Debtor’s conduct to evade or defeat taxes caused the liability over a mere passive nonpayment of the taxes. The debtor’s conduct went far beyond passive nonpayment. Judge Bentley emphasized there was a systematic failure to pay estimated taxes, despite clear knowledge of the legal obligation to do so; affirmative misrepresentations made to the IRS—through accountants and counsel—to secure installment agreements and block enforcement actions; asset-protection behavior, including transfers of millions of dollars in business interests and luxury items to family members for no consideration, rendering the debtor effectively judgment collection-proof. And Debtor’s lavish discretionary spending, including gambling, even while substantial tax liabilities remained unpaid.

While the debtor argued that his gambling addiction explained much of his conduct, the court rejected that defense, noting he had successfully structured his finances in other years to ensure taxes were paid before discretionary spending. The Court did not deny the Debtor his bankruptcy discharge, but only exempted from the discharge the tax debt that otherwise could have been discharged but for the debtor’s failing to meet the fourth test.

If you would like more details, please do not hesitate to call our office. Our office has been successful in helping taxpayers with IRS and IDOR collection problems for over 32 years. If you have a tax or debt problem, please contact me at 847-705-9698 or thughes@lavellelw.com and find out how we can help you.

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