Bankruptcy Forms: Filing Bankruptcy Chapter 7 Bankruptcy Software Chapter 13

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TITLE 11–BANKRUPTCY

CHAPTER 11– REORGANIZATION

Sub Chapter III – Postconfirmation Matters

Sec. 1146. Special tax provisions

  (a) For the purposes of any State or local law imposing a tax on or 
measured by income, the taxable period of a debtor that is an individual 
shall terminate on the date of the order for relief under this chapter, 
unless the case was converted under section 706 of this title.
    (b) The trustee shall make a State or local tax return of income for 
the estate of an individual debtor in a case under this chapter for each 
taxable period after the order for relief under this chapter during 
which the case is pending.
    (c) The issuance, transfer, or exchange of a security, or the making 
or delivery of an instrument of transfer under a plan confirmed under 
section 1129 of this title, may not be taxed under any law imposing a 
stamp tax or similar tax.
    (d) The court may authorize the proponent of a plan to request a 
determination, limited to questions of law, by a State or local 
governmental unit charged with responsibility for collection or 
determination of a tax on or measured by income, of the tax effects, 
under section 346 of this title and under the law imposing such tax, of 
the plan. In the event of an actual controversy, the court may declare 
such effects after the earlier of--
        (1) the date on which such governmental unit responds to the 
    request under this subsection; or
        (2) 270 days after such request.

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2641; Pub. L. 98-353, title III, 
Sec. 517, July 10, 1984, 98 Stat. 388.)


                      Historical and Revision Notes

                         legislative statements

    Section 1146 of the House amendment represents a compromise between 
the House bill and Senate amendment.
    Special tax provisions: reorganization: The House bill provided 
rules on the effect of bankruptcy on the taxable year of the debtor and 
on tax return filing requirements for State and local taxes only. The 
House bill also exempted from State or local stamp taxes the issuance, 
transfer, or exchange of a security, or the making or delivery of an 
instrument of transfer under a plan. The House bill also authorized the 
bankruptcy court to declare the tax effects of a reorganization plan 
after the proponent of the plan had requested a ruling from State or 
local tax authority and either had received an unfavorable ruling or the 
tax authority had not issued a ruling within 270 days.
    The Senate amendment deleted the rules concerning the taxable years 
of the debtor and tax return filing requirements since the Federal rules 
were to be considered in the next Congress. It broadened the rule 
exempting transfers of securities to include Federal stamp or similar 
taxes, if any. In addition, the Senate amendment deleted the provision 
which permitted the bankruptcy court to determine the tax effects of a 
plan.
    The House amendment retains the State and local rules in the House 
bill with one modification. Under the House amendment, the power of the 
bankruptcy court to declare the tax effects of the plan is limited to 
issues of law and not to questions of fact such as the allowance of 
specific deductions. Thus, the bankruptcy court could declare whether 
the reorganization qualified for taxfree status under State or local tax 
rules, but it could not declare the dollar amount of any tax attributes 
that survive the reorganization.


                        senate report no. 95-989

    Section 1146 provides special tax rules applicable to Title 11 
reorganizations. Subsection (a) provides that the taxable period of an 
individual debtor terminates on the date of the order for relief, unless 
the case has been converted into a reorganization from a liquidation 
proceeding.
    Subsection (b) requires the trustee of the estate of an individual 
debtor in a reorganization to file a tax return for each taxable period 
while the case is pending after the order for relief. For corporations 
in chapter 11, the trustee is required to file the tax returns due while 
the case is pending (sec. 346(c)(2)).
    Subsection (c) exempts from Federal, State, or local stamp taxes the 
issuance, transfer, or exchange of a security, or the making or delivery 
of an instrument of transfer under a plan. This subsection is derived 
from section 267 of the present Bankruptcy Act [section 667 of former 
title 11].
    Subsection (d) permits the court to authorize the proponent of a 
reorganization plan to request from the Internal Revenue Service (or 
State or local tax authority) an advance ruling on the tax effects of 
the proposed plan. If a ruling is not obtained within 270 days after the 
request was made, or if a ruling is obtained but the proponent of the 
plan disagrees with the ruling, the bankruptcy court may resolve the 
dispute and determine the tax effects of the proposed plan.
    Subsection (e) provides that prepetition taxes which are 
nondischargeable in a reorganization, and all taxes arising during the 
administration period of the case, may be assessed and collected from 
the debtor or the debtor's successor in a reorganization (see sec. 
505(c) of the bill).


                         house report no. 95-595

    Section 1146 of title 11 specifies five subsections which embody 
special tax provisions that apply in a case under chapter 11 of title 
11. Subsection (a) indicates that the tax year of an individual debtor 
terminates on the date of the order for relief under chapter 11. 
Termination of the taxable year of the debtor commences the tax period 
of the estate. If the case was converted from chapter 7 of title 11 then 
the estate is created as a separate taxable entity dating from the order 
for relief under chapter 7. If multiple conversion of the case occurs, 
then the estate is treated as a separate taxable entity on the date of 
the order for relief under the first chapter under which the estate is a 
separate taxable entity.
    Subsection (d) permits the court to authorize the proponent of a 
plan to request a taxing authority to declare the tax effects of such 
plan. In the event of an actual controversy, the court may declare the 
tax effects of the plan of reorganization at any time after the earlier 
of action by such taxing authority or 270 days after the request. Such a 
declaration, unless appealed, becomes a final judgment and binds any tax 
authority that was requested by the proponent to determine the tax 
effects of the plan.


                               Amendments

    1984--Subsec. (c). Pub. L. 98-353, Sec. 517(a), struck out ``State 
or local'' before ``law imposing a stamp tax''.
    Subsec. (d)(1). Pub. L. 98-353, Sec. 517(b), substituted ``or'' for 
``and''.


                    Effective Date of 1984 Amendment

    Amendment by Pub. L. 98-353 effective with respect to cases filed 90 
days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out 
as a note under section 101 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 106, 346, 348 of this title; 
title 28 section 2201.


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Legal Resource Center: United States Code TITLE 11 Filing Bankruptcy Forms Software