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Tax consequences of Bankruptcy/amend return?

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chris7

Member
What is the name of your state? TX

My hubby filed Ch. 7 BK (asset case) on Dec. 28 2004. I did our 2004 tax return in March 2005 and sent it off. On it I claimed a NOL carryover and a capital loss carryover from 2003. Well, as I'm gearing up for this years taxes I found and read IRS pub 908 (Bankruptcy tax guide) which very clearly states that the loss carryovers from 2003 belonged to the BK estate and were not ours to use. Going back and removing those carryover losses does not change our tax refund from 2004 (which the BK trustee got) since we had ample 2004 losses which are considered post-bankruptcy since we did not claim the split year election. So.... the question is do I go ahead and amend the 04 tax return, removing the 03 carryover losses from the forms? Even if I don't formally amend I'm not going to use the losses, I would just remove them from the tally when I do this years taxes. I don't want to run afoul of the IRS but I also don't know if this is a big deal. Thanks
 


abezon

Senior Member
The NOL & capital losses were an asset of the BK estate that should have been listed. Failure to list them might mean the BK trustee could reopen your case. The trustee had the option of filing amended returns carrying the NOL back to get a refund of past taxes. If carrying the NOL back would not have resulted in a refund, the trustee wouldn't have bothered. Talk to your BK attorney for more info.
 

chris7

Member
That's the big question for me, where should they have been reported on the forms? I went back over our paperwork and can not find anyplace that looks like the place they should have been listed. I know that pleading ignorance does not get you anywhere but this is kind of obscure stuff and before a couple days ago I had never heard of reporting NOL's in bankruptcy, and our attorney never asked about or mentioned it. The best I can tell from section 1398 is that all tax attributes, as of the first day of the year that the BK is filed, succeed (tranfer?) to the BK estate. It does not mention how they are to be reported on the petition or whether this is an automatic transferral. I'm not trying to get out of anything, I'm trying to figure out how to fix the mistake. I know it seems logical to contact our attorney but I'm reluctant since he never seemed particularly well informed about bankruptcy details if they were not part of the "by the book" average BK filing, and we have had no contact with him for about 9 months. Our case is nearing the end, the trustee has filed the final report before distribution and gotten court approval to pay himself and I need to know before the case is closed what I should do about this.
 

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