Bankruptcy Estates

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Taxation of Bankruptcy Estates

Taxation of Bankruptcy Estates of an Individual The bankruptcy estate that is created when an individual debtor files a petition under either chapter 7 or 11 of title 11 of the U.S. Code is treated as a separate taxable entity. The bankruptcy estate is administered by a trustee or a debtor-in-possession. If the case is later dismissed by the bankruptcy court, the individual debtor is treated as if the bankruptcy petition had never been filed.

Use Form 1041 only as a transmittal for Form 1040. In the top margin of Form 1040 write "Attachment to Form 1041. DO NOT DETACH." Attach Form 1040 to Form 1041. Complete only the identification area at the top of Form 1041. Enter the name of the individual debtor in the following format: "John Q. Public Bankruptcy Estate." Beneath, enter the name of the trustee in the following format: "Avery Snow, Trustee." In Item D, enter the date the petition was filed or the date of conversion to a chapter 7 or 11 case.

Enter on Form 1041, line 23, the total tax from line 62 of Form 1040. Complete lines 24 through 29 of Form 1041, and sign and date it.



Form 1041 Bankruptcy Estates - General Information

  • When an individual debtor files a bankruptcy petition, a separate tax entity is created
  • A Chapter 7 or 11 bankruptcy estate is a separate and distinct taxable entity from the individual debtor for Federal income tax purposes

Who Must File

Form 1041 - U.S. Income Tax Return for Estates and Trusts

  • Bankruptcy Estate, Gross Income of $7,950 or more

Accounting Period

  • A bankruptcy estate is allowed to have a fiscal year
  • The period can be no longer than 12 months

When to File

  • 15th day of the 4th month after the end of the tax year
  • Extension: First Extension - Form 2758, 3 months automatic. The extension can be extended for up to 6 months using Form 2758 after the first 3 month extension

Amended Return

  • Check the Amended Return box on the front of Form 1041

Exemption

  • A Bankruptcy estate is allowed a personal exemption of $3,100.
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