[Title 26 CFR 601.109]
[Code of Federal Regulations (annual edition) - April 1, 1997 Edition]
[Title 26 - INTERNAL REVENUE]
[Chapter I - INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY--(Continued)]
[Subchapter H - INTERNAL REVENUE PRACTICE]
[Part 601 - STATEMENT OF PROCEDURAL RULES]
[Subpart A - General Procedural Rules]
[Sec. 601.109 - Bankruptcy and receivership cases.]
[From the U.S. Government Publishing Office]




  26
  INTERNAL REVENUE
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  1997-04-01
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  1997-04-01
  
  
  
  
    INTERNAL REVENUE
    INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY--(Continued)
    INTERNAL REVENUE PRACTICE
    STATEMENT OF PROCEDURAL RULES
    General Procedural Rules
  




Sec. 601.109   Bankruptcy and receivership cases.

    (a) General. (1) Upon the adjudication of bankruptcy of any taxpayer 
in any liquidating proceeding, the filing or (where approval is required 
by the Bankruptcy Act) the approval of a petition of, or the approval of 
a petition against, any taxpayer in any other proceeding under the 
Bankruptcy Act or the appointment of a receiver for any taxpayer in any 
receivership proceeding before a court of the United States or of any 
State or Territory or of the District of Columbia, the assessment of any 
deficiency in income, profits, estate, or gift tax (together with all 
interests, additional amounts, or additions to the tax provided for by 
law) shall be made immediately. See section 6871 of the Code. In such 
cases the restrictions imposed by section 6213(a) of the Code upon 
assessments are not applicable. (In the case of an assignment for the 
benefit of creditors, the assessment will be made under section 6861, 
relating to jeopardy assessments. See Sec. 601.105(h).) Cases in which 
immediate assessment will be made include those of taxpayers in 
receivership or in bankruptcy, reorganization, arrangement, or wage 
earner proceedings, under Chapters I to VII, section 77, Chapters X, XI, 
XII, and XIII of the Bankruptcy Act. The term ``approval of a petition 
in any other proceeding under the Bankruptcy Act'' includes the filing 
of a petition under Chapters XI to XIII of the Bankruptcy Act with a 
court of competent jurisdiction. A fiduciary in any proceeding under the 
Bankruptcy Act (including a trustee, receiver, debtor in possession, or 
other person designated by the court as in control of the assets or 
affairs of a debtor) or a receiver in any receivership proceeding may be 
required, as provided in regulations prescribed under section 6036 of 
the Code, to give notice in writing to the district director of his 
qualification as such. Failure on the part of such fiduciary in a 
receivership proceeding or a proceeding under the Bankruptcy Act to give 
such notice, when required, results in the suspension of the running of 
the period of limitations on the making of assessments from the date of 
the institution of the proceeding to the date upon which such notice is 
received by the district director, and for an additional 30 days 
thereafter. However, in no case where the required notice is not given 
shall the suspension of the running of the period of limitations on 
assessment exceed 2 years. See section 6872 of the Code.
    (2) Except in cases where departmental instructions direct 
otherwise, the district director will, promptly after ascertaining the 
existence of any outstanding Federal tax liability against a taxpayer in 
any proceeding under the Bankruptcy Act or receivership proceeding, and 
in any event within the time limited by appropriate provisions of law or 
the appropriate orders of the court in which such proceeding is pending, 
file a proof of claim covering such liability in the court in which the 
proceeding is pending. Such a claim may be filed regardless of whether 
the unpaid taxes involved have been assessed. Whenever an immediate 
assessment is made of any income, estate, or gift tax after the 
commencement of a proceeding the district director will send to the 
taxpayer notice and demand for payment together with a copy of such 
claim.
    (b) Procedure in office of district director. (1) While the district 
director is required by section 6871 of the Code to make immediate 
assessment of any deficiency in income, estate, or gift taxes, such 
assessment is not made as a jeopardy assessment (see paragraph (h) of 
Sec. 601.105), and the provisions of section 6861 of the Code do not 
apply to any assessment made under section 6871. Therefore, the notice 
of deficiency

[[Page 39]]

provided for in section 6861(b) will not be mailed to the taxpayer. 
Nevertheless, Letter 1005 (DO) will be prepared and addressed in the 
name of the taxpayer, immediately followed by the name of the trustee, 
receiver, debtor in possession, or other person designated to be in 
control of the assets or affairs of the debtor by the court in which the 
bankruptcy or receivership proceeding is pending. Such letter will state 
how the deficiency was computed, advise that within 30 days a written 
protest under penalties of perjury may be filed with the district 
director showing wherein the deficiency is claimed to be incorrect, and 
advise that upon request an Appeals office conference will be granted 
with respect to such deficiency. If, after protest is filed (in 
triplicate), and an Appeals office conference is held, adjustment 
appears necessary in the deficiency, appropriate action will be taken. 
Except where the interests of the Government require otherwise, Letters 
1005 (DO) are issued by the office of the district director.
    (2) The immediate assessment required by section 6871 of the Code 
represents an exception to the usual restrictions on the assessment of 
Federal income, estate, and gift taxes. Since there are no restrictions 
on the assessment of Federal excise or employment taxes, immediate 
assessment of such taxes will be made in any case where section 6871 of 
the Code would require immediate assessment of income, estate, or gift 
taxes.
    (3) If after such assessment a claim for abatement is filed and such 
claim is accompanied by a request in writing for a conference, an 
Appeals office conference will be granted. Ordinarily, only one 
conference will be held, unless it develops that additional information 
can be furnished which has a material bearing upon the tax liability, in 
which event the conference will be continued to a later date.
    (c) Procedure before the Appeals office. If an income, estate, or 
gift tax case is under consideration by an Appeals office (whether 
before or after issuance of a statutory notice of deficiency) at the 
time of either: (i) The adjudication of bankruptcy of the taxpayer in 
any liquidating proceeding; (ii) the filing with a court of competent 
jurisdiction or (where approval is required by the Bankruptcy Act) the 
approval of a petition of, or against, the taxpayer in any other 
proceeding under the Bankruptcy Act; or (iii) the appointment of any 
receiver, then the case will be returned to the district director for 
assessment (if not previously made), for issuance of the Letter 1005 
(DO), and for filing proof of claim in the proceeding. Excise and 
employment tax cases pending in the Appeals office at such time will 
likewise be returned to the district director for assessment (if not 
previously made) and for filing proof of claim in the proceeding. A 
petition for redetermination of a deficiency may not be filed in the Tax 
Court after the adjudication of bankruptcy, the filing or (where 
approval is required by the Bankruptcy Act) the approval of a petition 
of, or the approval of a petition against, the taxpayer in any other 
bankruptcy proceeding, or the appointment of a receiver. See section 
6871(b) of the Code. However, the Tax Court is not deprived of 
jurisdiction where the adjudication of bankruptcy, the filing or (where 
approval is required by the Bankruptcy Act) the approval of a petition 
of, or the approval of a petition against, the taxpayer in any other 
bankruptcy proceeding, or the appointment of a receiver, occurred after 
the filing of the petition. In such a case, the jurisdiction of the 
bankruptcy or receivership court and the Tax Court is concurrent.
    (d) Priority of claims. Under section 3466 of the Revised Statutes 
and section 3467 of the Revised Statutes, as amended, taxes are entitled 
to priority over other claims therein stated and the receiver or other 
person designated as in control of the assets or affairs of the debtor 
by the court in which the receivership proceeding is pending may be held 
personally liable for failure on his part to protect the priority of the 
Government respecting taxes of which he has notice. Under section 64 of 
the Bankruptcy Act, taxes may be entitled to priority over other claims 
therein stated and the trustee, receiver, debtor in possession or other 
person designated as in control of the assets or affairs of the debtor 
by the court in which the bankruptcy proceeding is

[[Page 40]]

pending may be held personally liable for any failure on his part to 
protect a priority of the Government respecting taxes of which he has 
notice and which are entitled to priority under the Bankruptcy Act. 
Sections 77(e), 199, 337(2), 455, and 659(6) of the Bankruptcy Act also 
contain provisions with respect to the rights of the United States 
relative to priority of payment. Bankruptcy courts have jurisdiction 
under the Bankruptcy Act to determine all disputes regarding the amount 
and the validity of tax claims against a bankrupt or a debtor in a 
proceeding under the Bankruptcy Act. A receivership proceeding or an 
assignment for the benefit of creditors does not discharge any portion 
of a claim of the United States for taxes and any portion of such claim 
allowed by the court in which the proceeding is pending and which 
remains unsatisfied after the termination of the proceeding shall be 
collected with interest in accordance with law. A bankruptcy proceeding 
under Chapters I through VII of the Bankruptcy Act does discharge that 
portion of a claim of the United States which became legally due and 
owning more than three years preceding bankruptcy, with certain 
exceptions provided in the Bankruptcy Act as does a proceeding under 
section 77 or Chapter X of the Bankruptcy Act. Any taxes which are 
dischargeable under the Bankruptcy Act which remain unsatisfied after 
the termination of the proceeding may be collected only from exempt or 
abandoned property.

[32 FR 15990, Nov. 22, 1967, as amended at 33 FR 6821, May 4, 1968; 35 
FR 15917, Oct. 9, 1970; 43 FR 44503, Sept. 28, 1978; 45 FR 7255, Feb. 1, 
1980]