"Doug" <PurplePenguin44[at]yahoo.com> wrote:

- quote -

The trustee in bankruptcy is a federal employee, and is the
trustee for many bankruptcies. The US trustee is always at
the forefront in chapter 7 cases.

In Chapter 11 and 13 cases, though, there is the possibility
that the debtor can continue to control the assets of the
bankruptcy estate. In those cases he's called a debtor in
possession.

Stu

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"Doug" <PurplePenguin44[at]yahoo.com> wrote:

- quote -

Not sure where you learned that. Try IRS Publication 908.
It might clear things up for you.

- quote -

In a chapter 11 it's usually the debtor as
debtor-in-possesion (DIP) unless he misbehaves and the
creditors get an independent trustee appointed.

For chapters 7 and 13 the Bankruptcy Courts have standing
trustees who do this for a living.

- quote -

I don't think there is, but even if there is, it's the
trustee's problem, not the debtor's.

--
Phil Marti
Clarksburg, MD

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Thanks for the info, guys.

Now, I have learned that a return for a bankruptcy estate is
a 1041, where basically you just fill out the top and
reference an attached (or enclosed?) 1040.

And, if you don't mind, one question about bankruptcy in
general, can you please give me a couple of examples as far
as who the trustee commonly is?

And, Phil, I take it from the parenthetic comment of yours
that there is in fact no requirement to file a return for
the bankruptcy estate for a chapter 13, which would of
course be great news! Am I reading you correctly?

-Doug

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"Doug" <PurplePenguin44[at]yahoo.com> wrote:

- quote -

You're right, chapter 11 is not the same as Title 11. Title
11 is the bankruptcy code, which includes Chapter 7, 11 and
13 bankruptcies, among others. So if "title 11"
cancellation of debt is not income, that would include
"chapter 7."

Incidentally, one of the rules, as I recall, is that
cancellation of debt income is not taxable if the person is
insolvent at the time. You can't get a chapter 7 discharge
unless you are insolvent.

- quote -

Right, under §1398.

- quote -

Bankruptcy attorneys often know nothing about taxes, that's
why. Under the current bankruptcy laws, the procedures have
become so burdensome that lawyers have had to raise their
rates a lot just to file what should be a simple bankruptcy.
I'm sure they'd have a hard time getting money out of the
client for doing tax returns as well.

- quote -

Go read §1398 and the regulations under that section. That
should tell you what you need to know.

- quote -

From my reading of the statute it looks like it shouldn't be
more difficult than doing a partnership or corporate return.
But then I don't do returns so for me they're all easy.

Stu

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"Doug" <PurplePenguin44[at]yahoo.com> wrote:

- quote -

check with the bankruptcy trustee to find out what they filed

___________________________________
<<< Benjamin Yazersky, CPA [NJ & NY] > > -----> real address on hobokeni or hobokenx <-----

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"Doug" <PurplePenguin44[at]yahoo.com> wrote:

- quote -

Tax filing requirements for the bankruptcy estate (there
aren't any for a chapter 7) are the concern of the trustee,
not the debtor. Her bankrutpcy attorney should have told
her if her refund will go to the creditors rather than to
her. (I don't remember the exact timing rules on that one.)

--
Phil Marti
Clarksburg, MD

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Hi Everyone,

I recognized I was in over my head, and I properly told her
that she really needed to go back and talk with her
attorney.

A young lady came in with a seemingly simple tax return of
two W-2s. In the course of talking with her, she shared with
me that she had declared bankruptcy, that it had been
finalized in December, and that it had been chapter 7
wiping-the-slate-clean type of bankruptcy, as opposed to a
chapter 11 re-structuring.

I know that debt forgiveness generally is taxable. So I
looked it up in Quickfinder, saw that release of debt
through title 11 bankruptcy was not taxable income, but no
mention of 7, mmm? I told her that I would do some more
research and call her back. She accepted that (not all
clients do!).

Do you see the initial confusion? 'Chapter' 11 vs. 'Title
11.'

Title 11 is the over-arching bankruptcy law of which there
are various chapters. And she was probably thinking of ch
13 which is personal restructuring of debt, as opposed to
the often-mentioned ch 11 which is for business
restructuring.

But, in my research, I did find that she would have to file
a separate tax return for the bankruptcy estate. I called
her that evening and told her (I've found that people like a
prompt call-back even if you're only able to give them a
partial answer).

I expected the law firm to tell her that they had done the
bankruptcy, everything was finished, she would have to do
the taxes on her own. Most people just aren't good at after
sales service, and that's the fact of the matter.

Then I got to thinking, how could they not have done the tax
return for the bankruptcy estate? And then we might get to,
in my opinion, that most people aren't good at educating the
client. I'm a nerd, I like understanding things. I
probably overdo it the other way (for example, Hope Credit
vs. Lifetime Learning Credit and how you might want to save
your first year of the Hope, I just don't know a way of
explaining that short, concise, but also lays out what the
person needs to know). I guess it's like being a doctor,
some people want to know what's going on, other people just
want to be told what to do. So you kind of have to be a
poker player and get pretty good at reading people. You
kind of make a medium raise and see which way the person
wants to go.

Okay, so I'd like to know some more about the bankruptcy
estate. Or, comment about any of the above.

I worked for H&R Block tax season 2003, did other stuff for
the last couple of years, and am working for Jackson Hewitt
this year. I am emphatically not a CPA (but I am
interested!)

I don't expect to be able to do one (bankruptcy estate),
certainly not at this stage in my career. I just want to be
able to recognize the animal in the forest so to speak.

Thanks,

Doug

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