Syllabus - Bankruptcy Tax, Summer 2018 (final).docx



LAW 522 – Bankruptcy Taxuniversity of san francisco school of lawadjunct professor steven l. walkerADMINISTRATIONCourse Description This course provides an overview of tax audits and investigations by the Internal Revenue Service, and more specifically the potential tax crimes and penalties that a taxpayer, who is the subject of a civil examination or criminal investigation, may face. The course covers the major topics involved in a governmental investigation including: the IRS criminal investigation process, government information gathering tools through the use of summons and subpoenas, commonly charged tax crimes, taxpayer defenses, sentencing guidelines, offshore tax compliance, the Bank Secrecy Act, the Foreign Account Tax Compliance Act, IRS voluntary disclosure practice, the Fifth Amendment privilege against self-incrimination, and attorney-client privilege. Prerequisite: Federal Income Taxation for JD students.Course ObjectivesLearn and become familiar with a few key words and phrases used in bankruptcy and know a few important Bankruptcy and Internal Revenue Code provisions, which often arise in a bankruptcy-taxation case.Understand how the IRS taxes a bankruptcy estate in chapter 7 and 11 cases.Learn how to determine the priority and dischargeability of tax claims.Known how to litigate a tax case in bankruptcy court.Understand when a taxpayer has discharge of indebtedness income, the timing of the realization of that income, and the reporting requirements (Form 1099-C).Understand the conditions of I.R.C. § 108 as to when income from a discharge of indebtedness is excluded from gross income, and when this impacts a tax attributes.Required Course MaterialsCollier on Bankruptcy (Richard Levin & Henry J. Sommer eds., 16th ed.) (“Collier”); can be found online through Lexis/Nexis.Sections of the Bankruptcy Code and Internal Revenue Code; you may access this through your law school accounts for Westlaw or Lexis.Supplemental Course MaterialsAdditional reading items may be distributed via Canvas. Examination and GradingYour letter grade for this course will be based on (1) weekly homework assignments completion, (2) class participation, and (3) an anonymously graded final examination. Completion of the weekly homework problems and class participation through the Discussion Board count toward 40% of your grade. The specific problems to complete per week are noted in the syllabus. To get credit, the answers to those problems must be submitted via Canvas by the deadline. The examination counts towards 60% of your grade. For the exam, you will be allowed to use the course materials and anything prepared by you (including class notes). A simple calculator may be used. Class SessionsThere will be no live class sessions. Please refer to Canvas for the weekly course materials and other information. Americans with Disability Act Accommodations USF affords all students with disabilities equal access under the law. If you are in need of accommodation under the Americans with Disabilities Act (ADA) or similar enactment, you must contact the University Student Disability Services Office at 415.422.2613 or sds@usfca.edu to obtain the appropriate accommodation.Academic DishonestyDefined as engaging in any dishonest conduct in connection with any examination, written work, or other academic activity. The University of San Francisco takes academic dishonesty very seriously. You are responsible for knowing and adhering to the explicit details of our policy as listed here in the Student Honor Code: USF School of Law Student Honor Code (Refer to pages 3-4) (web address: )HOW TO STUDY FOR THIS COURSEA few recommendations before you begin the course:Listen to the lecture.Do the reading. Download and save a copy of each week’s reading assignments to your computer, and then mark-up and annotate the reading materials. Do not simply read the materials online. The most effective way to learn is through reading and marking-up (annotating) the assigned reading. Bankruptcy tax is a code-driven practice area, so you must know how to read and understand the Bankruptcy Code, along with Internal Revenue Code. I recommend having a paper copy and marking up (annotating) the Code as we go through the course; do not simply read the Code online. The answers to the homework problems are graded based upon the effort that you put into the assignment and not necessarily whether you reach the correct answer. This means you are graded on your legal analysis. Make sure to cite the applicable authority to support your answer. We will be discussing and working through the homework problems on the Discussion Board beginning Monday of each week. That means you should be ready to participate in the class early in the week. You are graded on your class participation, which involves posting three substantive responses each week. Do not wait until the weekend to start posting. Make an outline each week (by Sunday night) of what you learned the prior week. This will help you greatly in learning the course materials. As we move through the course, you should periodically go back and review your outlines so when it comes time to take the final exam you are ready to go. Preparing for the final exam should not be a “cram” process but instead a review of your weekly outlines. Finally, stay up with the class each week and don’t get behind. Good luck, and I hope you enjoy the course!COURSE SCHEDULEBelow is the course schedule. Please make sure to check Canvas for any updates or changes. Week 1 – IntroductionObjectives:This week, we are beginning our study of bankruptcy taxation. After this week, you should know and understand the following:essential words and phrases used in a bankruptcy case;common bankruptcy and Internal Revenue Code sections that come into play; the differences between chapter 7, 11 and 13 cases;common tax issues encountered prior to filing a title 11 case, and issues that arise during the administration of a case; and the overall organization and structure of the Bankruptcy code.Collier on Bankruptcy: TX1.06 – TX1.10 Bankruptcy CodeSkim the Code so you become familiar with the organization and structure.SupplementalReading:Chapter 7 – Bankruptcy Basics (handout)Chapter 13 – Bankruptcy Basics (handout)Chapter 11 – Bankruptcy Basics (handout)Homework Problems: See handout.Week 2 - Federal Taxation of the Non-Corporate Bankruptcy EstateObjectives:This week, we are beginning our study of bankruptcy taxation. After this week, you should know and understand the following concepts: property of the bankruptcy estate;taxation of the bankruptcy estate;section 1398 short-period election;tax reporting requirements in an individual chapter 7, 11 and 13; and partnerships and corporations – filing requirements.Collier on Bankruptcy: TX2.01 – 2.05 (skim)Skip 2.04[2][j]Skip 2.05[4][b] – [d], and 2.05[5]Skip 2.06Skip 2.07TX3.03 (skim)IRS Publication 908 (10/2012), Bankruptcy Tax GuideInternal Revenue Code:IRC § 1398OptionalReadings:Checkpoint EXP ?13,984.01 Taxation of the bankruptcy estateEXP ?13,984.02 Property transfers between bankruptcy estate and individual debtor and treatment of tax attributesEXP ?13,984.03 Credit or refund of overpayment of tax in bankruptcy casesEXP ?13,984.04 Trustee's request for prompt determination of bankruptcy estate's tax liabilityCheckpoint EXP ?13,984.05 Debtor's election of short tax yearProblems: See handout.Week 3 - Priority and Dischargeability of Tax ClaimsObjectives:This week, we are focusing on priority and dischargeability of tax claims. After this week, you should know and understand:second priority, administrative tax claims;third priority, involuntary gap tax claims;fourth priority, tax claims on wages, salaries or commissions;eighth priority, prepetition tax claims:income and gross receipts taxes: The Three-Year Rule;income and gross receipts taxes: The 240-Day Rule;Taxes Assessable After the Petition Date;Withholding Tax Claims;Tax Penalties;fraudulent, unfiled or delinquent tax returns; andthe following exceptions from discharge:tax debt when the debtor taxpayer was required to file a tax return but did not, tax debt associated with late tax returns filed within two years of the debtor's bankruptcy filing, andtax debt associated with tax returns that are fraudulent or evasive.Collier on Bankruptcy: TX 4.02 [1][a], [b], and [c]TX 4.02 [1][d] but skip [ii], [v], [vii] and [viii]TX 4.02 [2]Bankruptcy Code:11 U.S.C. § 503(b)(1)(B)11 U.S.C. § 502(f)11 U.S.C. § 507 (a)(2)11 U.S.C. § 507 (a)(3)11 U.S.C. § 507 (a)(4)11 U.S.C. § 507 (a)(8)11 U.S.C. § 523(a)(1)(A), (B), and (C)Cases:Smith v. United States IRS (In re Smith), 828 F.3d 1094 (9th Cir. 2016)Hawkins v. Franchise Tax Bd., 769 F.3d 662 (9th Cir. 2014)Problems: See handout.Week 4 - Priority and Dischargeability of Tax Claims (Continued)Objectives:This week, we are focusing on priority and dischargeability of tax claims. After this week, you should know and understand:administrative and other postpetition tax claims,secured tax claims and priority of tax liens, andinterest on tax claims.Collier on Bankruptcy: TX 4.03[1], [2], and [4]; skip [1][a] and [3]TX 4.04[1] – [5]; skip [6], [7]TX 4.05Bankruptcy Code:11 U.S.C. § 503(b)(1)(B)11 U.S.C. § 506(a), (d)11 U.S.C. § 507(a)(2)11 U.S.C. § 727(b)11 U.S.C. § 1129(a)(9)(A)11 U.S.C. § 1322(a)(2)11 U.S.C. § 1129(a)(9)(C)Internal Revenue Code:26 U.S.C. § 632126 U.S.C. § 632226 U.S.C. § 6323 (skim)Problems: See handout.Week 5 – Litigation with the IRS in Bankruptcy CourtObjectives:This week, we are focusing on tax litigation involving the IRS in bankruptcy court. After this week, you should know and understand:the key personnel representing the government in a bankruptcy case;the claims objection process, what is a secured claim, what is an unsecured claim, what is a general unsecured claim, when to file an objection to an IRS proof of claim, and what is a contested matter;determinations of tax liability by the bankruptcy court (know and understand sections 505(b), 505(b)(2), and 505(c));the effect of the automatic stay on (a) the IRS examination process, (b) the IRS’ ability to assess a tax liability, (c) IRS’ collection efforts, and (d) a pending Tax Court litigation case; andset off of claims by the IRS, preference litigation against the IRS, and abstention (a general understanding of these concepts is all that is required).Collier on Bankruptcy:TX5.01TX5.02TX 5.03 [1]TX 5.04 [1], [2][a], 2[b], 3[a], 3[b], and [4]TX5.06 [1], [2], [3], [4], [5], and [6]TX 5.08 [1], [2], [3], [5], [6], [7] (skim)TX 5.09[1], [3], [4] (skim)TX 5.10 (skim)Bankruptcy Code and Rules:11 U.S.C. § 362(a)(8) Automatic Stay11 U.S.C. § 362(b)(9), (b)(26) Automatic Stay11 U.S.C. § 502(a) Allowance of claims or interests11 U.S.C. § 505(a) Determination of tax liability11 U.S.C. § 505(b)(2) Determination of tax liability11 U.S.C. § 505(c) Determination of tax liability11 U.S.C. § 547. PreferencesFed. R. Bankr. P. 3007. Objections to ClaimsFed. R. Bankr. P. 9014. Contested MattersInternal Revenue Code:I.R.C. § 6402(a) Authority to make credits or refundsI.R.C. § 6503(h) Suspension of running of period of limitationsUnsecured Priority Taxes (handout)Homework Problems: See handout.Week 6 – Discharge of IndebtednessObjectives:This week, we are focusing on the discharge of indebtedness. After this week, you should know and understand:what constitutes a discharge of indebtedness for purposes of I.R.C. § 61(a)(12),dispositions of property in satisfaction of debt (recourse and nonrecourse),timing of realization of income from discharge of indebtedness, andreporting requirements (Form 1099-C).Collier on Bankruptcy:TX6.01TX6.02 (skip 6.02[c])TX6.03TX6.05TX6.06 (skip 6.06[e])TX6.07[c] and [g]Internal Revenue Code and Regulations:I.R.C. § 61(a)(12)Treas. § 1.61-12(a)Treas. Reg. § 1.1001-2, examples 6, 7, and 8Treas. Reg. §?1.6050P-1(h)Cases: United States v. Kirby Lumber Co., 284 U.S. 1 (1931)Commissioner v. Tufts, 461 U.S. 300 (1982)Problems: See handout.Week 7 - I.R.C. Section 108 ReliefObjectives:This week, we are focusing on Internal Revenue Code Section 108. After this week, you should know and understand:when discharge of indebtedness is excluded from gross income under sections 108(a)(1)(A), (B) and (D);the reduction of tax attributes under section 108(b);special election to first reduce basis of depreciable property under section 108(b)(5)(A); andform 982, Reduction of Tax Attributes Due to Discharge of Indebtedness.Collier on Bankruptcy:TX6.03[1], [2], [3], and [4]Skip TX6.03[3][c][iii], [iv], [vi]Skip TX6.03[4][b][iii], [c]Supplemental Reading:Checkpoint EXP ?1084.01 Discharge of indebtedness income not taxedCheckpoint EXP ?1084.02 Reduction of tax attributesForm 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (skim)Checkpoint has a good summary of the law that can be used as an outline.Internal Revenue Code and Regulations:I.R.C. §108I.R.C. §1017Problems: See handout. ................
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