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Bankruptcy and Insolvency Taxation, 4th Edition by Robert Liquerman, Grant W. Newton

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CHAPTER FOUR

Taxation of Bankruptcy Estates and Debtors

§ 4.1 Introduction

§ 4.2 Responsibility for Filing Income Tax Returns

(a) Responsibility of Trustee

§ 4.3 Accounting for the Bankruptcy Estate

(a) Separate Entity

(b) Returns to Be Filed

(c) Attribute Carryover to Estate

(i) Passive Activity Losses

(ii) Gain on Sale of Residence

(iii) Unlisted Attributes

(iv) Accounting Period

(v) Net Operating Loss

(d) Estate’s Income

(i) Partnerships and S Corporations

(e) Estate’s Deductions, Credits, and Employment Taxes

(i) Accrued Expenses

(ii) Administrative Expenses

(f) Net Operating Loss Carryback

(g) Change in Accounting Period

(h) Tax Liability of the Estate

(i) Distributions from the Estate

(j) Abandonment of Property

(i) Argument for Taxable Event

(A) Avoidance of Liability

(B) Denial of Fresh Start

(C) Transfer as a Taxable Event

(D) Substance over Form

(E) Section 1398 (f)(2)

(ii) Internal Revenue Service’s Position

(iii) Court Rulings

(iv) Abandonment to Debtor or Creditor

(k) Abandonment of Proceeds

§ 4.4 Accounting for the Debtor (Individual)

(a) Individual Debtor’s Taxable Year

(i) Procedures for Election

(ii) Electing “Short” Tax Year

(b) Tax Refunds and Estimated Tax Payments

(c) Income and Deductions

(d) Attribute Carryover to Debtor

(i) Method of Accounting

(e) Loss Carryback

(f) Automatic Stay

§ 4.5 Summary

§ 4.1 INTRODUCTION

The procedure for filing tax returns for corporations is well established; however, much controversy existed in the past over the types of returns ...

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