Tax News

CCH (cch.taxgroup.com) reports:

The IRS has ruled that a postponement of time to file a return pursuant to the grant of Code Sec. 7508 combat zone relief or Code Sec. 7508A relief due to a presidentially declared disaster does not change the date on which the return is last due, including extensions, for bankruptcy purposes and does not affect the priority and dischargeability of the tax liability in a bankruptcy proceeding.
In the three fact situations presented by the IRS, neither the Code Sec. 7508 relief nor the Code Sec. 7508A relief change or extend the due date for filing a tax return, including the extended due date under Code Sec. 6081. Instead, the period of postponement is disregarded.
Because relief under Code Sec. 7508 or Code Sec. 7508A neither changes nor extends the return's due date (or the return's extended due date), the postponement does not change the date on which the return is "last due, including extensions" under section 507(a)(8)(A)(i) of the Bankruptcy Code. Thus, the date on which an individual's return is last due, including extensions, is the return's due date or extended due date fixed by Code Sec. 6072 or 6081, rather than the last day of the relief period.
Under the facts presented, the date on which the individual's tax return is last due precedes the date that is three years before the filing of the bankruptcy petition. Therefore, the IRS's tax claim is not entitled to eighth priority under section 507(a)(8)(A)(i) of the Bankruptcy Code and the tax liability is not excepted from discharge under section 523(a)(1)(A) of the Bankruptcy Code.
In addition, with regard to the third fact situation, the date on which the tax return was "last due, under applicable law or under extension" under section 523(a)(1)((ii) of the Bankruptcy Code was likewise unaffected by the Code Sec. 7508 relief. Because under these facts the return was filed after the date on which the return was last due under applicable law or under any extension, and because the date of the petition was less than two years from the date on which the return was filed, the tax liability was excepted from discharge under sections 523(a)(1)((ii) and 727(b) of the Bankruptcy Code.
The IRS clarifies that the holding that Code Sec. 7508A relief does not affect the return's last due date, including extensions, for bankruptcy purposes also applies to an "affected taxpayer" other than an individual described in Reg. §301.7508A-1(d)(1).
Rev. Rul. 2007-59, 2007FED ¶46,624
Other References:
Code Sec. 7508
CCH Reference - 2007FED ¶42,687.22
Code Sec. 7508A
CCH Reference - 2007FED ¶42,687C.22
Tax Research Consultant
CCH Reference - TRC FILEIND: 15,204.20
CCH Reference - TRC FILEBUS: 15,108
CCH Reference - TRC FILEBUS: 15,110