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Bankruptcy

Tax Court – Sale of scrap metal didn’t result in self-employment income

Tax Court – Sale of scrap metal didn’t result in self-employment income

Ryther, TC Memo 2016-56 The Tax Court has concluded that scrap metal abandoned by a steel-fabrication business and later sold by the owner of that bankrupt business didn’t generate self-employment income.  Click here for the Opinion of the Court. Background. A taxpayer’s self-employment income is subject to self-employment tax. (Code Sec. 1401(a), Code Sec. 1401(b)) Self-employment […]

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District Court – statute of limitations on collection extended by taxpayer bankruptcy, offer in compromise

District Court – statute of limitations on collection extended by taxpayer bankruptcy, offer in compromise

Fields, (DC NM 3/17/2016) 117 AFTR 2d ¶ 2016-528 A district court has approved IRS’s calculation of an extension of the statute of limitations (SOL) on collection based on the taxpayer’s bankruptcy and his submission of an offer in compromise. It also approved IRS’s foreclosing on its liens on the taxpayer’s property that arose from […]

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Texas tycoon Wyly engaged in massive tax fraud, IRS tells court

Texas tycoon Wyly engaged in massive tax fraud, IRS tells court

DALLAS (Reuters) – Texas tycoon Sam Wyly engaged in “lies, deception and fraud” in a years-long scheme to dodge taxes on $1.1 billion held in offshore trusts, a lawyer for the Internal Revenue Service said on Wednesday. The IRS made those claims at the start of a trial in federal bankruptcy court in Dallas in […]

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Corporate executive not entitled to deduction for unpaid loan to bankrupt company

Corporate executive not entitled to deduction for unpaid loan to bankrupt company

Cooper, TC Memo 2015-191 The Tax Court, siding with IRS, has determined that a taxpayer couldn’t deduct the amount of an unpaid loan that he made to a construction company owned by an acquaintance that later filed for bankruptcy. The Court found that the taxpayer, who was employed full-time in an executive role and had […]

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Supreme Court won’t review case denying discharge of tax debt on taxpayers’ late-filed return

Supreme Court won’t review case denying discharge of tax debt on taxpayers’ late-filed return

Mallo, (CA 10 12/29/2014) 114 AFTR 2d 2014-7022, cert denied 6/29/2015 The Supreme Court has declined to review a decision of the Court of Appeals for the Tenth Circuit that held that, except with respect to returns prepared with the assistance of IRS under Code Sec. 6020(a), debts with respect to late-filed tax returns are […]

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Tax Court: IRS can disregard taxpayer’s instructions when applying court-directed tax payments

Tax Court: IRS can disregard taxpayer’s instructions when applying court-directed tax payments

Riggs, TC Memo 2015-98 The Tax Court has held that: a) a bankruptcy rule that stays civil actions didn’t apply where the taxpayer’s successor-in-interest, but not the taxpayer, filed for bankruptcy; b) IRS didn’t abuse its discretion by declining to put taxpayer’s tax debt into uncollectible status; and c) IRS didn’t have to follow the […]

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Court rejects bankruptcy allocation based on transfer pricing agreement

Court rejects bankruptcy allocation based on transfer pricing agreement

In re Nortel Networks Inc., et al, (Bktcy Ct DL 5/12/2015) Case No. 09-10138 (KG), Dkt No. 13208 A bankruptcy court has determined that $7.3 billion proceeds from the bankruptcy sales of a highly integrated multinational tech enterprise were to be allocated among the creditors on a modified pro rata basis—the same conclusion reached by […]

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Penalties Dischargeable Where Tax Liability Accrued More Than 3 Years Before Bankruptcy Filing

Penalties Dischargeable Where Tax Liability Accrued More Than 3 Years Before Bankruptcy Filing

Wilson, (Bktcy Ct CA 2/25/2015) 115 AFTR 2d ¶ 2015-485 A Bankruptcy Court ruled that penalties for failure to file a tax return under Code Sec. 6651(a)(1) were dischargeable where the penalties were imposed upon tax liabilities that accrued more than three years before the filing of a bankruptcy petition, notwithstanding the fact that the […]

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Tax Court: IRS Notice of Collection Determination Issued After Bankruptcy Filing Was Invalid

Tax Court: IRS Notice of Collection Determination Issued After Bankruptcy Filing Was Invalid

Yuska, TC Memo 2015-77 The Tax Court has ruled that a bankruptcy statute that bars certain actions against a debtor applied to invalidate IRS’s Notice of Determination Concerning Collection Actions that it issued after a taxpayer filed for bankruptcy. Click here for the Opinion of the Court. Facts. On Nov. 19, 2013, IRS sent the taxpayer, […]

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Another circuit holds that tax debt on late-filed return rarely dischargeable in bankruptcy

Another circuit holds that tax debt on late-filed return rarely dischargeable in bankruptcy

The Court of Appeals for the First Circuit has held that, except with respect to returns prepared with the assistance of IRS under Code Sec. 6020(a), debts for unpaid taxes from late-filed tax returns are not dischargeable in bankruptcy. In so doing, it came to the same conclusion as the Fifth and Tenth Circuits.  Click here for In […]

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IRS: No installment agreement on post-petition liabilities for taxpayer in bankruptcy

IRS: No installment agreement on post-petition liabilities for taxpayer in bankruptcy

In a memorandum, IRS’s Small Business/Self-Employed (SBSE) Division has advised its personnel that if a taxpayer is in bankruptcy, an installment agreement request on post-petition liabilities will no longer be accepted.  Click here for SBSE-05-0315-0033, “Processing Installment Agreement Requests for Post – Petition Liabilities when a Taxpayer is in Bankruptcy.”  Background. In the past, taxpayers in specific bankruptcy […]

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Installment agreement request on post-petition liabilities rejected if taxpayer is in bankruptcy

Installment agreement request on post-petition liabilities rejected if taxpayer is in bankruptcy

In a memorandum, SBSE-05-0315-0033, “Processing Installment Agreement Requests for Post – Petition Liabilities when a Taxpayer is in Bankruptcy.” IRS’s Small Business/Self-Employed Division (SBSE) has advised its personnel that if a taxpayer is in bankruptcy, an installment agreement request on post-petition liabilities will no longer be accepted. Background. In the past, taxpayers in specific bankruptcy […]

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Bankruptcy after product liability didn’t justify longer carryback for worthless stock

Bankruptcy after product liability didn’t justify longer carryback for worthless stock

Chief Counsel Advice 201442054 In Chief Counsel Advice (CCA), IRS has concluded that the worthless stock deductions claimed by a taxpayer in respect to stock of a subsidiary that was cancelled as part of a bankruptcy reorganization, did not qualify as product liability deductions and thus were ineligible for the 10-year carryback allowable for specified […]

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Tax Court denies losses claimed in distressed asset/debt transactions

Tax Court denies losses claimed in distressed asset/debt transactions

Kenna Trading, LLC, Jetstream Business Limited, Tax Matters Partner, et al., (2014) 143 TC No. 181   In consolidated cases, the Tax Court has, on a number of separate grounds, denied partnership losses claimed for distressed consumer receivables acquired from a retailer in bankruptcy reorganization. The Court found, among other things, that the retailers did […]

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Lavish spending alone doesn’t prevent discharge of taxes in bankruptcy

Lavish spending alone doesn’t prevent discharge of taxes in bankruptcy

William M. Hawkins, III v. FTB, USA, IRS, (CA 9 9/15/2014) 114 AFTR 2d ¶2014-5247 The Court of Appeals for the Ninth Circuit has held that a district court improperly affirmed a bankruptcy court’s judgment that a taxpayer’s tax debts were excepted from discharge in a chapter 11 bankruptcy proceeding because his profligate spending showed […]

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IRS examines thorny issues in applying bankruptcy exception to ownership change loss limit

IRS examines thorny issues in applying bankruptcy exception to ownership change loss limit

PLR 201435003 In a private letter ruling (PLR), IRS has provided guidance on the potential application of Code Sec. 382(l)(5)’s bankruptcy exception to an affiliated group of corporations that underwent a reverse triangular merger, the consummation of which was contingent upon approval by the bankruptcy court. Among other things, IRS concluded that the group will […]

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Debtor’s tax liabilities not discharged in bankruptcy

Debtor’s tax liabilities not discharged in bankruptcy

In re Ollie-Barnes, (Bktcy Ct 11/06/2014) 114 AFTR 2d ¶ 2014-5413 A bankruptcy court has rejected a debtor’s claim that her federal tax liabilities were discharged in bankruptcy and noted that: 1) the fact that the tax debt was omitted from the bankruptcy trustee’s report of filed claims didn’t cause the claim to be disallowed […]

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Partner secondarily liable for partnership’s unpaid employment taxes

Partner secondarily liable for partnership’s unpaid employment taxes

Pitts v. U.S. (DC CA 08/12/2014) 114 AFTR 2d ¶ 2014-5171 A district court, affirming a bankruptcy court, has held that a partner was secondarily liable for a partnership’s unpaid employments taxes and that IRS could proceed with collection from her without having taken specific actions against her individually. The district court also found that […]

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In Denial About Your Debts? The First Step Toward Solvency Is Facing Financial Reality

In Denial About Your Debts? The First Step Toward Solvency Is Facing Financial Reality

In Denial About Your Debts? The First Step Toward Solvency Is Facing Financial Reality, as reported in the WS Journal. The young man was having bad dreams and trouble sleeping. He told Wynnewood, Pa., psychologist Maggie Baker that he was haunted by his two card tables full of unopened bills. Ms. Baker, who specializes in […]

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IRS could levy on pension plan account that was excluded, not exempted, in bankruptcy

IRS could levy on pension plan account that was excluded, not exempted, in bankruptcy

In Gross v. Commissioner, (CA 9th Cir.,  2/25/2014) 113 AFTR 2d ¶ 2014-529, the Court of Appeals for the Ninth Circuit, affirming the Tax Court, has determined that an individual taxpayer’s pension plan account was excluded rather than exempted from his bankruptcy estate. Accordingly, it concluded that IRS’s tax lien continued to attach post-bankruptcy discharge […]

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Meet Paul Raymond

Meet Paul Raymond

Mr. Raymond is a sought after speaker in tax controversy law by many attorney, accountant, and business groups and at the request of the Internal Revenue Service, has presented programs at the IRS Nationwide Tax Forum, attended by tax professionals throughout the United States.

Additionally, he continues to be an active member in the Section of Taxation, American Bar Association, where he was the Past Chair of the Employment Taxes Committee.

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Member CA Bar Member Orange County Bar US Tax Court Attorney