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Tax Refund Property Of The Estate?
Jeff:
This is a fairly common problem. People who overpay taxes get refunds. When a client comes in near the end of the year, youmight ask if they think they will be getting a refund. We don't catch them all, but when I'm exempting a refund, a red flag appears.
If there is enough time in the year, you can advise the client to change exemptions to 9 for the remainder of the year. That way the debtor stops paying in extra money and no refund is left in the next year. Tell the client to go back to the regular exemptions or the following year there will be a giant liability.
This won't help with current client, but may help in the future, cause David is right, probably the best you can do is prorate.
dennis
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No rule of law applicable. Common sense approach adopted by most, if not
all, is to pro-rate.
David A. Tilem
Certified Bankruptcy Specialist*
Law Offices of David A. Tilem (a debt relief agency)
206 N. Jackson Street, #201, Glendale, CA 91206
Tel: 818-507-6000 Fax: 818-507-6800
* Bankruptcy specialist cert. by State Bar of CA Bd of Legal
Specialization.
jbsesq1965
Sent: Tuesday, January 26, 2010 6:38 PM
To: cdcbaa@yahoogroups.com
Subject: [cdcbaa] Tax Refund Property Of The Estate?
My client filed bankruptcy in October of 2009. When he filed he had not yet
completed his 2008 tax return. The debtor estimated that he would be due a
refund for 2008 of about $5,000 which we listed in his schedules and
exempted with the last of his available wildcard exemption.
After the Chapter 7 was filed the debtor had his tax returns prepared and
discovered he was entitled to a much larger refund for 2008, closer to
$20,000. We informed the Trustee at the 341(a) hearing of the discrepancy
and admitted that there was no available exemption to protect the excess tax
refund (about $15,000) and agreed to turn that refund over to the Trustee
promptly.
The debtor called me yesterday with this interesting information. His
accountant has already started work on his 2009 taxes and there may be more
refund money owed to the debtor for 2009. Now that the Trustee is definitely
going to administer the case and will be searching for additional non-exempt
assets, I suspect, what is our obligation to advise the Trustee that the
debtor may be entitled to a significant refund for 2009?
Part of me says that there is an argument that the Trustee could make that
at least some portion of the 2009 tax refund is attributable to activity
which occurred pre-petition (between January and October of 2009), and
therefore the estate has an interest in the refund for 2009. Another part of
me says that the debtor is not entitled to a refund, at all, until the end
of 2009 which is post-petition and therefore the 2009 tax refund is not
property of the estate.
Your collective words of wisdom would be appreciated.
Jeffrey B. Smith
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Message
No rule of law
applicable. Common sense approach adopted by most, if not all, is topro-rate.
David A.
Tilem
Certified Bankruptcy
Specialist*
The post was migrated from Yahoo.
My client filed bankruptcy in October of 2009. When he filed he had not yet completed his 2008 tax return. The debtor estimated that he would be due a refund for 2008 of about $5,000 which we listed in his schedules and exempted with the last of his available wildcard exemption.
After the Chapter 7 was filed the debtor had his tax returns prepared and discovered he was entitled to a much larger refund for 2008, closer to $20,000. We informed the Trustee at the 341(a) hearing of the discrepancy and admitted that there was no available exemption to protect the excess tax refund (about $15,000) and agreed to turn that refund over to the Trustee promptly.
The debtor called me yesterday with this interesting information. His accountant has already started work on his 2009 taxes and there may be more refund money owed to the debtor for 2009. Now that the Trustee is definitely going to administer the case and will be searching for additional non-exempt assets, I suspect, what is our obligation to advise the Trustee that the debtor may be entitled to a significant refund for 2009?
Part of me says that there is an argument that the Trustee could make that at least some portion of the 2009 tax refund is attributable to activity which occurred pre-petition (between January and October of 2009), and therefore the estate has an interest in the refund for 2009. Another part of me says that the debtor is not entitled to a refund, at all, until the end of 2009 which is post-petition and therefore the 2009 tax refund is not property of the estate.
Your collective words of wisdom would be appreciated.
Jeffrey B. Smith
The post was migrated from Yahoo.