Another income tax return question

[dmg]

My husband and I had our 341 meeting last Tuesday. The trustee is not going to take our income tax return from us. My question is - would my husband and I have to file our tax return any different than we have in the past? I'm not sure if filing bankruptcy changes the way you file - as far as forms and such.

[Minnymouth]

The income tax part of BK is amazing............

If you have a fire, you claim it on your income taxes, etc. If you sell or buy a home, it shows on your income tax.

If you claim BK - there's no "loss" at all, no way of claiming a loss (even if they take your property), sell it or anything. It shows no where as a loss on your taxes.

One year you own a home, next year you don't - no loss showing on income taxes.............

I found no way to claim my loss for my home being taken by the Trustee over the bad title.

CPA is still looking into this for me...............

Any thoughts or info on this subject ?

PS.. Since I am still living in the home (even though Trustee now owns it - till negoiations are over) I still have to maintain the property taxes and insurance on it..... this is all I can claim on my taxes. Yet the home does not belong to me any longer.


Minny

[HHM]

As far as I know, it does not change the way "you" file your taxes. However, what happens behind the scenes is that the Bankruptcy Trustee will file a tax return for your bankruptcy estate.

[Minnymouth]

Thanks HHM,
Sure didn't know that!!!! Interesting...............

Minny

[HHM]

In case your interested, the trustee completes Form 1041 Income Tax Return for Estates and Trustes

http://www.irs.gov/pub/irs-pdf/f1041.pdf

For most individuals, the bankruptcy does not in anyway effect the way you file your personal income tax returns. However, there can be some affects in the way costs basis of certain assets are treated in the future (but this is not a tax forum, talk to an accountant).

For businesses (and individuals, but its more common for businesses), the other option you have with taxes is that you can end your tax year on the day before you file BK. That way, any tax liability becomes the responsibility of the Bankruptcy Estate, but you only do this if (1) you will have tax liability for that period, and (2) if you know there will be some assets the bankruptcy trustee will liquidate and pay to creditors. (note, the tax liability is not discharged in the bankruptcy, but it becomes a priority claim so if there will be some payment made to creditors in a chapter 7, that tax liability will be paid ahead of unsecured creditors).

[Minnymouth]

Thanks for the info HHM,

Will look into this and see how it might affect me.....

Minny

[Pinktiger]

Thanks for explaining that, HHM. That is a question I had about this process early on, but nobody seemed to know what I was talking about when I asked (on another board.)
Glad to know we don't have to do anything on the tax issue.