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Pub. 908, Bankruptcy Tax Guide 2004 Tax Year

Introductory Material

This is archived information that pertains only to the 2004 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Introduction

This publication covers the federal income tax aspects of bankruptcy. Bankruptcy proceedings begin with the filing of a petition with the bankruptcy court. The filing of the petition creates a bankruptcy estate, which generally consists of all the assets of the person filing the bankruptcy petition. A separate taxable entity is created if the bankruptcy petition is filed by an individual under chapter 7 or chapter 11 of the Bankruptcy Code. These chapters are explained later. The tax obligations of taxable estates are discussed later under The Bankruptcy Estate.

The tax obligations of the person filing a bankruptcy petition (the debtor) vary depending on the bankruptcy chapter under which the petition was filed. For individuals, these are also explained in the first part of this publication. For other entities, see Partnerships and Corporations , later.

Generally, when a debt owed to another is canceled the amount canceled or forgiven is considered income that is taxed to the person owing the debt. If a debt is canceled under a bankruptcy proceeding, the amount canceled is not income. However, the canceled debt reduces the amount of other tax benefits the debtor would otherwise be entitled to. See Debt Cancellation, later.

This publication is not intended to cover bankruptcy law in general, or to provide detailed discussions of the tax rules for the more complex corporate bankruptcy reorganizations or other highly technical transactions. In these cases, you should seek competent professional advice.

Useful Items - You may want to see:

Publication

  • 536 Net Operating Losses

  • 538 Accounting Periods and Methods

  • 544 Sales and Other Dispositions of Assets

  • 551 Basis of Assets

Form (and Instructions)

  • SS—4 Application for Employer Identification Number

  • 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)

  • 1041 U.S. Income Tax Return for Estates and Trusts

  • 1041—ES Estimated Income Tax for Fiduciaries

See How To Get More Information, near the end of this publication for information about getting these publications and forms.

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