Document Type
Article
Publication Title
ABI Law Review
Publication Date
2001
Volume
9
First Page
523
Abstract
(Excerpt)
The focus of this article is the proper treatment in a chapter 7 or 11 bankruptcy proceeding of the federal income tax incurred by a corporate debtor for the year in which the bankruptcy petition is filed, the so-called "straddle-year." Bankruptcy law requires that the straddle-year income tax be apportioned between the pre-petition and post petition portions of the year for priority purposes. Yet, neither the relevant statutes nor the reported cases provide a principled method of apportionment. Under relevant tax law there are only two possible methods of apportionment: (1) to apportion ratably over time; or (2) to terminate the straddle year as of the date the bankruptcy petition is filed and to treat the pre-petition and post-petition portions of the year as separate taxable periods. Since the tax law in a bankruptcy-specific provision prohibits the second method, it is this author's contention that the tax must be apportioned ratably over time.
Comments
Reprinted with permission of the American Bankruptcy Institute Law Review. Originally published at 9 AM. BANKR. INST. L. REV. 523 (2001).