Bankruptcy Tax Act of 1980

Summary

Bankruptcy Tax Act of 1979 - Amends the Internal Revenue Code to exclude from gross income amounts of indebtedness which are discharged either pursuant to bankruptcy, when the taxpayer is insolvent (but only to the extent of such insolvency), or in cases of business indebtedness. Requires the reduction of specified tax attributes by the amount of discharged indebtedness which is excluded from gross income. Specifies that such tax attributes shall be: (1) net operating loss carryovers; (2) carryovers of the investment tax credit, work incentive (WIN) credit, and new jobs credit; (3) capital loss carryovers; and (4) the basis of the debtor's assets, but the basis of such assets shall not be reduced below the basis in the debtor's remaining undischarged liabilities. Provides that the reduction of such tax attributes shall be effected after the determination of the tax imposed upon the debtor is made. Requires the reduction of the basis of business assets of a taxpayer whose qualified business indebtedness has been discharged. Defines "qualified business indebtedness" as indebtedness assumed by a corporation or an individual in connection with property used in a trade or business. Prohibits the exclusion from gross income of amounts of discharge which would reduce or be offset by any net operating loss, or would increase any tax credit otherwise allowable. Sets forth rules for determining when income is attributable to a debtor from the discharge of qualified business indebtedness. Sets forth rules for the income tax treatment of the bankruptcy estate of an individual with respect to: (1) the allocation of income and deductions between the debtor and the estate; (2) the computation of the estate's taxable income; (3) accounting methods and periods; (4) the treatment of the estate's administration costs as deductible expenses; (5) the carryover of tax attributes between the debtor and the estate; and (6) requirements for filing and disclosure of returns. Provides for the treatment of insolvency reorganizations on the same basis as other types of corporate reorganizations for purposes of determining the taxability of the gain arising from such transactions. Treats property which is received in an insolvency reorganization and which is attributable to the payment of accrued interest as ordinary income. Permits the estate of an individual debtor to qualify as an eligible shareholder in a Subchapter S corporation. Suspends the running of the statute of limitations on assessments and collection of tax during the pendency of bankruptcy cases and for specified periods thereafter. Permits the trustee of a debtor's estate to intervene in any proceeding before the Tax Court to which the debtor is a party. Relieves a debtor's estate from the imposition of certain penalties for failure to pay tax if: (1) such failure follows a judicial determination of probable insufficiency of funds of the estate to pay administrative expenses; or (2) such tax was incurred before the earlier of an order for relief or the appointment of a trustee, and the petition in bankruptcy was filed before the due date for the filing of the tax return, or the date for making the addition to the tax occurs on or after the day on which the petition is filed. Limits provisions requiring the immediate assessment of tax liability to receivership proceedings and certain bankruptcy proceedings of individual debtors.

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Documents

6 official files

• Public Law (PDF)

  Public Law · EN · 25 December 1980

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• Passed Senate amended

  summary · EN · 13 December 1980

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• Reported to Senate with amendment(s)

  summary · EN · 25 November 1980

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• Passed House amended

  summary · EN · 24 March 1980

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• Reported to House with amendment(s)

  summary · EN · 19 March 1980

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• Introduced in House

  summary · EN · 1 August 1979

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