Marion A. Gill

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
MARION A. GILL,
Debtor.
)
)
)
)
)
)
Case No. 07-00358
(Chapter 13)
Not for Publication in
West’s Bankruptcy Reporter
MEMORANDUM DECISION RE OBJECTION TO EXEMPTION OF TSP ACCOUNT
The chapter 13 trustee has objected to the debtor’s claimed
exemption of a Thrift Savings Plan (“TSP”) account (more formally
known as a Thrift Savings Fund account) which the debtor
scheduled as property of the estate. 	A provision not cited by
the debtor, § 7701(j)(1)(A) of the Internal Revenue Code of 1986
(26 U.S.C.), appears to be dispositive. 	Section 7701(j)(1)(A)
provides that “the Thrift Savings Fund shall be treated as a
trust described in section 401(a) which is exempt from taxation
The decision below is signed as a decision of
the court.
Signed: October 11, 2007.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
Case 07-00358 Doc 47 Filed 10/11/07 Entered 10/11/07 12:43:11 Desc Main
Document Page 1 of 6

1 	Section 7701(j)(1), in full, provides:
(j) Tax treatment of Federal Thrift Savings Fund.--
(1) In general.--For purposes of this title--
(A) the Thrift Savings Fund shall be treated
as a trust described in section 401(a) which
is exempt from taxation under section 501(a);
(B) any contribution to, or distribution
from, the Thrift Savings Fund shall be
treated in the same manner as contributions
to or distributions from such a trust; and
(C) subject to section 401(k)(4)(B) and any
dollar limitation on the application of
section 402(e)(3), contributions to the
Thrift Savings Fund shall not be treated as
distributed or made available to an employee
or Member nor as a contribution made to the
Fund by an employee or Member merely because
the employee or Member has, under the
provisions of subchapter III of chapter 84 of
title 5, United States Code, and section 8351
of such title 5, an election whether the
contribution will be made to the Thrift
Savings Fund or received by the employee or
Member in cash.
The balance of § 7701(j) does not appear to raise any issue of
pertinence to the instant dispute.
2
under section 501(a).” 1 	For reasons that follow, if a TSP
account is property of the estate such that the exemptibility of
the account becomes an issue, § 7701(j)(1) appears to supply a
Case 07-00358 Doc 47 Filed 10/11/07 Entered 10/11/07 12:43:11 Desc Main
Document Page 2 of 6

2 	The Federal Retirement Thrift Investment Board takes the
position in a fact sheet entitled Bankruptcy Information, found
on the Thrift Savings Plan website, www.tsp.gov/forms/
publications.html, that a TSP account is not property of the
estate, citing to the anti-alienation provisions of 5 U.S.C. §
8437(e)(2) and to 11 U.S.C. § 541(c)(2), and at least one
decision agrees. 	See In re Cobb, 231 B.R. 236, 238 (Bankr.
D.N.J. 1999) (dicta). 	But the debtor has treated the TSP account
as property of the estate, and, accordingly, the issue raised is
one of exemptibility. 	Accordingly, the parties have not
addressed whether the TSP account is subject to a federal tax
lien and subject the federal tax levy power to enforce that lien,
and the effect that would have on interpreting § 541(c)(2). 	When
an account would be excluded from property of the estate under §
541(c)(2) in the absence of a federal tax lien, the holding of
more recent cases (and the current position of the Internal
Revenue Service (“IRS”) via an acquiescence in one of those
decisions) is that the account is not property of the estate even
with respect to the IRS as a creditor holding a lien on the
account. 	See U.S. I.R.S. v. Snyder, 343 F.3d 1171 (9th Cir.
2003), acq., 2004-41 I.R.B. 593, and recommendation regarding
acquiescence, AOD-2004-06, 2004 WL 2358268 (I.R.S. AOD 2004); In
re Richardson, 307 B.R. 485 (Bankr. D. Md. 2004). 	Both of those
decisions reject this court’s approach in Jones v. IRS (In re
Jones), 206 B.R. 614, 621 (Bankr. D.D.C. 1997) ("[T]he [pension]
would in effect have a split personality by remaining property of
the estate for purposes of federal tax claims even though it is
not property of the estate for purposes of other creditors'
claims."), and in In re Lyons, 148 B.R. 88, 94 (Bankr. D.D.C.
1992).
3
basis for treating the debtor’s TSP account as exemptible. 2
I
In claiming that the TSP account is exempt, the debtor has
relied on D.C. Code § 15-501(a)(9), which provides with
exceptions of no relevance here that the debtor may exempt:
money or other assets payable to a participant or
beneficiary from, or an interest of a participant or
beneficiary in, a retirement plan qualified under
sections 401(a), 403(a), 403(b), 408, 408A, 414(d), or
414(e) of the Internal Revenue Code of 1986, approved
October 22, 1986 (100 Stat. 2085; 26 U.S.C. § 1 et
Case 07-00358 Doc 47 Filed 10/11/07 Entered 10/11/07 12:43:11 Desc Main
Document Page 3 of 6

4
seq.) ("1986 Code"), or section 409 (as in effect prior
to January 1984) of the Internal Revenue Code of 1954,
approved August 6, 1954 (68A Stat. 3; 26 U.S.C. § 1 et
seq.)
[Emphasis added.]
The trustee could argue that the TSP account was not one
“qualified under” § 401 because it is only “treated as a trust
described in section 401(a)” pursuant to 26 U.S.C. §
7701(j)(1)(A), not as one “qualified under” § 401. 	See In re
Hasse, 246 B.R. 247, 251 (Bankr. E.D. Va. 2000) (TSP account was
not, within the meaning of a Virginia statute a “retirement plan
established pursuant to” § 401 of the Internal Revenue Code
despite being treated by 26 U.S.C. § 7701(j)(1)(A) as a trust
described in § 401(a)). 	However, the court in Hasse was
liberally construing the Virginia statute in favor of the
debtor’s claim of exemptions. 	Here, giving D.C. Code § 15-
501(a)(9) a liberal construction in favor of the debtor requires
treating the account as one “qualified under” § 401 and thus as
exemptible.
II
Moreover, even if the account could not be exempted under
District of Columbia law, the debtor could still claim the
account as exempt. 	The debtor, even after having elected not to
utilize the exemptions available under 11 U.S.C. § 522(d) and
having elected to proceed instead under 11 U.S.C. § 522(b)(3),
need not resort to District of Columbia law to exempt the
Case 07-00358 Doc 47 Filed 10/11/07 Entered 10/11/07 12:43:11 Desc Main
Document Page 4 of 6

5
account. 	Under 11 U.S.C. § 522(b)(3), as amended in 2005 by the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,
Pub. L. No. 109-8, § 322, 119 Stat. 23 (2005) (“BAPCPA”), a
debtor (like this debtor) who elects not to utilize the
exemptions specified in 11 U.S.C. § 522(d) may now claim as
exempt a category of property not mentioned under the pre-BAPCPA
Bankruptcy Code, namely:
retirement funds to the extent that those funds are in
a fund or account that is exempt from taxation under
section 401, 403, 408, 408A, 414, 457, or 501(a) of the
Internal Revenue Code of 1986.
11 U.S.C. § 522(b)(3)(C) [emphasis added].
Even if the account were not exemptible under the D.C. Code,
I see no reason to burden the debtor with formally amending the
Schedule C to recite 11 U.S.C. § 522(b)(3)(C) as the correct
statutory basis for the exemption: invoking § 522(b)(3)(C) would
have no impact on the extent to which other property may be
claimed as exempt.
III
It thus appears that I should uphold the debtor’s exemption
of the TSP account under both D.C. Code § 15-501(a)(9) (as an
account qualified under § 401 of the Internal Revenue Code) and
11 U.S.C. § 522(b)(3)(C) (as an account that is exempt from
taxation pursuant to 26 U.S.C. § 501(a)). 	However, the trustee
has not had an opportunity to respond to the foregoing analysis
as the debtor failed to cite 26 U.S.C. § 7701(j)(1)(A).
Case 07-00358 Doc 47 Filed 10/11/07 Entered 10/11/07 12:43:11 Desc Main
Document Page 5 of 6

6	O:\Judge Temp Docs\Gill Memorandum Decision re TSP Account Exemption v3.wpd
Accordingly, the court will permit the trustee to file a
memorandum showing cause why the claim of exemption ought not be
held to be proper despite the foregoing analysis.
[Signed and dated above.]
Copies to: Debtor; Debtor’s attorney; Chapter 13 Trustee; Office
of U.S. Trustee.
Case 07-00358 Doc 47 Filed 10/11/07 Entered 10/11/07 12:43:11 Desc Main
Document Page 6 of 6