-CITE-
    26 USC Subchapter V - Title 11 Cases                        01/19/04

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle A - Income Taxes
    CHAPTER 1 - NORMAL TAXES AND SURTAXES
    Subchapter V - Title 11 Cases

-HEAD-
                       SUBCHAPTER V - TITLE 11 CASES                   

-MISC1-
    Sec.                                                     
    1398.       Rules relating to individuals' title 11 cases.        
    1399.       No separate taxable entities for partnerships,
                 corporations, etc.                                   

                                AMENDMENTS                            
      1980 - Pub. L. 96-589, Sec. 3(a)(1), Dec. 24, 1980, 94 Stat.
    3397, added subchapter V heading "Title 11 Cases" and items 1398
    and 1399.

-End-



-CITE-
    26 USC Sec. 1398                                            01/19/04

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle A - Income Taxes
    CHAPTER 1 - NORMAL TAXES AND SURTAXES
    Subchapter V - Title 11 Cases

-HEAD-
    Sec. 1398. Rules relating to individuals' title 11 cases

-STATUTE-
    (a) Cases to which section applies
      Except as provided in subsection (b), this section shall apply to
    any case under chapter 7 (relating to liquidations) or chapter 11
    (relating to reorganizations) of title 11 of the United States Code
    in which the debtor is an individual.
    (b) Exceptions where case is dismissed, etc.
      (1) Section does not apply where case is dismissed
        This section shall not apply if the case under chapter 7 or 11
      of title 11 of the United States Code is dismissed.
      (2) Section does not apply at partnership level
        For purposes of subsection (a), a partnership shall not be
      treated as an individual, but the interest in a partnership of a
      debtor who is an individual shall be taken into account under
      this section in the same manner as any other interest of the
      debtor.
    (c) Computation and payment of tax; basic standard deduction
      (1) Computation and payment of tax
        Except as otherwise provided in this section, the taxable
      income of the estate shall be computed in the same manner as for
      an individual. The tax shall be computed on such taxable income
      and shall be paid by the trustee.
      (2) Tax rates
        The tax on the taxable income of the estate shall be determined
      under subsection (d) of section 1.
      (3) Basic standard deduction
        In the case of an estate which does not itemize deductions, the
      basic standard deduction for the estate for the taxable year
      shall be the same as for a married individual filing a separate
      return for such year.
    (d) Taxable year of debtors
      (1) General rule
        Except as provided in paragraph (2), the taxable year of the
      debtor shall be determined without regard to the case under title
      11 of the United States Code to which this section applies.
      (2) Election to terminate debtor's year when case commences
        (A) In general
          Notwithstanding section 442, the debtor may (without the
        approval of the Secretary) elect to treat the debtor's taxable
        year which includes the commencement date as 2 taxable years - 
            (i) the first of which ends on the day before the
          commencement date, and
            (ii) the second of which begins on the commencement date.
        (B) Spouse may join in election
          In the case of a married individual (within the meaning of
        section 7703), the spouse may elect to have the debtor's
        election under subparagraph (A) also apply to the spouse, but
        only if the debtor and the spouse file a joint return for the
        taxable year referred to in subparagraph (A)(i).
        (C) No election where debtor has no assets
          No election may be made under subparagraph (A) by a debtor
        who has no assets other than property which the debtor may
        treat as exempt property under section 522 of title 11 of the
        United States Code.
        (D) Time for making election
          An election under subparagraph (A) or (B) may be made only on
        or before the due date for filing the return for the taxable
        year referred to in subparagraph (A)(i). Any such election,
        once made, shall be irrevocable.
        (E) Returns
          A return shall be made for each of the taxable years
        specified in subparagraph (A).
        (F) Annualization
          For purposes of subsections (b), (c), and (d) of section 443,
        a return filed for either of the taxable years referred to in
        subparagraph (A) shall be treated as a return made under
        paragraph (1) of subsection (a) of section 443.
      (3) Commencement date defined
        For purposes of this subsection, the term "commencement date"
      means the day on which the case under title 11 of the United
      States Code to which this section applies commences.
    (e) Treatment of income, deductions, and credits
      (1) Estate's share of debtor's income
        The gross income of the estate for each taxable year shall
      include the gross income of the debtor to which the estate is
      entitled under title 11 of the United States Code. The preceding
      sentence shall not apply to any amount received or accrued by the
      debtor before the commencement date (as defined in subsection
      (d)(3)).
      (2) Debtor's share of debtor's income
        The gross income of the debtor for any taxable year shall not
      include any item to the extent that such item is included in the
      gross income of the estate by reason of paragraph (1).
      (3) Rule for making determinations with respect to deductions,
        credits, and employment taxes
        Except as otherwise provided in this section, the determination
      of whether or not any amount paid or incurred by the estate - 
          (A) is allowable as a deduction or credit under this chapter,
        or
          (B) is wages for purposes of subtitle C,

      shall be made as if the amount were paid or incurred by the
      debtor and as if the debtor were still engaged in the trades and
      businesses, and in the activities, the debtor was engaged in
      before the commencement of the case.
    (f) Treatment of transfers between debtor and estate
      (1) Transfer to estate not treated as disposition
        A transfer (other than by sale or exchange) of an asset from
      the debtor to the estate shall not be treated as a disposition
      for purposes of any provision of this title assigning tax
      consequences to a disposition, and the estate shall be treated as
      the debtor would be treated with respect to such asset.
      (2) Transfer from estate to debtor not treated as disposition
        In the case of a termination of the estate, a transfer (other
      than by sale or exchange) of an asset from the estate to the
      debtor shall not be treated as a disposition for purposes of any
      provision of this title assigning tax consequences to a
      disposition, and the debtor shall be treated as the estate would
      be treated with respect to such asset.
    (g) Estate succeeds to tax attributes of debtor
      The estate shall succeed to and take into account the following
    items (determined as of the first day of the debtor's taxable year
    in which the case commences) of the debtor - 
      (1) Net operating loss carryovers
        The net operating loss carryovers determined under section 172.
      (2) Charitable contributions carryovers
        The carryover of excess charitable contributions determined
      under section 170(d)(1).
      (3) Recovery of tax benefit items
        Any amount to which section 111 (relating to recovery of tax
      benefit items) applies.
      (4) Credit carryovers, etc.
        The carryovers of any credit, and all other items which, but
      for the commencement of the case, would be required to be taken
      into account by the debtor with respect to any credit.
      (5) Capital loss carryovers
        The capital loss carryover determined under section 1212.
      (6) Basis, holding period, and character of assets
        In the case of any asset acquired (other than by sale or
      exchange) by the estate from the debtor, the basis, holding
      period, and character it had in the hands of the debtor.
      (7) Method of accounting
        The method of accounting used by the debtor.
      (8) Other attributes
        Other tax attributes of the debtor, to the extent provided in
      regulations prescribed by the Secretary as necessary or
      appropriate to carry out the purposes of this section.
    (h) Administration, liquidation, and reorganization expenses;
      carryovers and carrybacks of certain excess expenses
      (1) Administration, liquidation, and reorganization expenses
        Any administrative expense allowed under section 503 of title
      11 of the United States Code, and any fee or charge assessed
      against the estate under chapter 123 of title 28 of the United
      States Code, to the extent not disallowed under any other
      provision of this title, shall be allowed as a deduction.
      (2) Carryback and carryover of excess administrative costs, etc.,
        to estate taxable years
        (A) Deduction allowed
          There shall be allowed as a deduction for the taxable year an
        amount equal to the aggregate of (i) the administrative expense
        carryovers to such year, plus (ii) the administrative expense
        carrybacks to such year.
        (B) Administrative expense loss, etc.
          If a net operating loss would be created or increased for any
        estate taxable year if section 172(c) were applied without the
        modification contained in paragraph (4) of section 172(d), then
        the amount of the net operating loss so created (or the amount
        of the increase in the net operating loss) shall be an
        administrative expense loss for such taxable year which shall
        be an administrative expense carryback to each of the 3
        preceding taxable years and an administrative expense carryover
        to each of the 7 succeeding taxable years.
        (C) Determination of amount carried to each taxable year
          The portion of any administrative expense loss which may be
        carried to any other taxable year shall be determined under
        section 172(b)(2), except that for each taxable year the
        computation under section 172(b)(2) with respect to the net
        operating loss shall be made before the computation under this
        paragraph.
        (D) Administrative expense deductions allowed only to estate
          The deductions allowable under this chapter solely by reason
        of paragraph (1), and the deduction provided by subparagraph
        (A) of this paragraph, shall be allowable only to the estate.
    (i) Debtor succeeds to tax attributes of estate
      In the case of a termination of an estate, the debtor shall
    succeed to and take into account the items referred to in
    paragraphs (1), (2), (3), (4), (5), and (6) of subsection (g) in a
    manner similar to that provided in such paragraphs (but taking into
    account that the transfer is from the estate to the debtor instead
    of from the debtor to the estate). In addition, the debtor shall
    succeed to and take into account the other tax attributes of the
    estate, to the extent provided in regulations prescribed by the
    Secretary as necessary or appropriate to carry out the purposes of
    this section.
    (j) Other special rules
      (1) Change of accounting period without approval
        Notwithstanding section 442, the estate may change its annual
      accounting period one time without the approval of the Secretary.
      (2) Treatment of certain carrybacks
        (A) Carrybacks from estate
          If any carryback year of the estate is a taxable year before
        the estate's first taxable year, the carryback to such
        carryback year shall be taken into account for the debtor's
        taxable year corresponding to the carryback year.
        (B) Carrybacks from debtor's activities
          The debtor may not carry back to a taxable year before the
        debtor's taxable year in which the case commences any carryback
        from a taxable year ending after the case commences.
        (C) Carryback and carryback year defined
          For purposes of this paragraph - 
          (i) Carryback
            The term "carryback" means a net operating loss carryback
          under section 172 or a carryback of any credit provided by
          part IV of subchapter A.
          (ii) Carryback year
            The term "carryback year" means the taxable year to which a
          carryback is carried.

-SOURCE-
    (Added Pub. L. 96-589, Sec. 3(a)(1), Dec. 24, 1980, 94 Stat. 3397;
    amended Pub. L. 99-514, title I, Sec. 104(b)(14), title XIII, Sec.
    1301(j)(8), title XVIII, Sec. 1812(a)(5), Oct. 22, 1986, 100 Stat.
    2105, 2658, 2833.)

-REFTEXT-
                            REFERENCES IN TEXT                        
      Part IV of subchapter A, referred to in subsec. (j)(2)(C)(i),
    probably means part IV of subchapter A of chapter 1 of this title.


-MISC1-
                                AMENDMENTS                            
      1986 - Subsec. (c). Pub. L. 99-514, Sec. 104(b)(14)(A),
    substituted "basic standard deduction" for "zero bracket amount" in
    heading.
      Subsec. (c)(3). Pub. L. 99-514, Sec. 104(b)(14)(B), amended par.
    (3) generally, substituting "Basic standard deduction" for "Amount
    of zero bracket amount" in heading and substituting "In the case of
    an estate which does not itemize deductions, the basic standard
    deduction for the estate" for "The amount of the estate's zero
    bracket amount" in text.
      Subsec. (d)(2)(B). Pub. L. 99-514, Sec. 1301(j)(8), substituted
    "section 7703" for "section 143".
      Subsec. (g)(3). Pub. L. 99-514, Sec. 1812(a)(5), amended par. (3)
    generally. Prior to amendment, par. (3), recovery exclusion, read
    as follows: "Any recovery exclusion under section 111 (relating to
    recovery of bad debts, prior taxes, and delinquency amounts)."

                     EFFECTIVE DATE OF 1986 AMENDMENT                 
      Amendment by section 104(b)(14) of Pub. L. 99-514 applicable to
    taxable years beginning after Dec. 31, 1986, see section 151(a) of
    Pub. L. 99-514, set out as a note under section 1 of this title.
      Amendment by section 1301(j)(8) of Pub. L. 99-514 applicable to
    bonds issued after Aug. 15, 1986, except as otherwise provided, see
    sections 1311 to 1318 of Pub. L. 99-514, set out as an Effective
    Date; Transitional Rules note under section 141 of this title.
      Amendment by section 1812(a)(5) of Pub. L. 99-514 effective,
    except as otherwise provided, as if included in the provisions of
    the Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such
    amendment relates, see section 1881 of Pub. L. 99-514, set out as a
    note under section 48 of this title.

                              EFFECTIVE DATE                          
      Subchapter applicable to bankruptcy cases commencing more than 90
    days after Dec. 24, 1980, see section 7(b) of Pub. L. 96-589, set
    out as an Effective Date of 1980 Amendment note under section 108
    of this title.

            PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989        
      For provisions directing that if any amendments made by subtitle
    A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
    title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
    amendment to any plan, such plan amendment shall not be required to
    be made before the first plan year beginning on or after Jan. 1,
    1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
    note under section 401 of this title.

-SECREF-
                   SECTION REFERRED TO IN OTHER SECTIONS               
      This section is referred to in sections 108, 443, 1399, 6103 of
    this title.

-End-



-CITE-
    26 USC Sec. 1399                                            01/19/04

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle A - Income Taxes
    CHAPTER 1 - NORMAL TAXES AND SURTAXES
    Subchapter V - Title 11 Cases

-HEAD-
    Sec. 1399. No separate taxable entities for partnerships,
      corporations, etc.

-STATUTE-
      Except in any case to which section 1398 applies, no separate
    taxable entity shall result from the commencement of a case under
    title 11 of the United States Code.

-SOURCE-
    (Added Pub. L. 96-589, Sec. 3(a)(1), Dec. 24, 1980, 94 Stat. 3400.)

-End-