Tax Analysts, a leading provider of tax news, analysis, and commentary, covers the interplay of bankruptcy and insolvency taxes with the Internal Revenue Code, associated regulations, IRS guidance and court opinions. Filing for bankruptcy will affect existing tax debts, as well as create future tax consequences. Rules will also vary based on the identity and type of taxpayer, on the timing of the debts and the bankruptcy filing, and on whether the bankruptcy is filed under Chapter 7, Chapter 11, Chapter 13, or another provision of the Bankruptcy Code.
The Internal Revenue Code addresses the effects of bankruptcy in a number of provisions, including special treatment for individuals otherwise affected by the section 108 discharge of indebtedness rules, section 6229, which provides special rules for assessments against debtors in title 11 cases, section 7433, which imposes penalties on the IRS for violating specified bankruptcy procedures, and section 7507, which exempts insolvent banks from tax.
In addition to tax legislation, IRS guidance, including publications such as Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments, Tax Analysts also publishes all court cases addressing controversies involving both bankruptcy and taxation. More notable controversies have included situations in which a taxpayer’s employer files for bankruptcy (for instance, United States v. Quality Stores, 134 S. Ct. 1395 (2014) ("Guidance Issued on Application of Quality Stores Holding")) and in which the effects of a bankrupt partnership on a non-bankrupt partner are at issue (Jose Gracia, et ux. v. Commissioner; T.C. Memo. 2004-147, (Partner Not Required to Include Discharge of Partnership Debt in Income); AOD 2015-01; 2015-6 IRB 1 ("IRS Won't Acquiesce in Partnership Cancellation of Debt Decisions").
Tax Notes consistently and promptly publishes all relevant developments regarding tax issues associated with insolvency taxes.