- 12 -
the debtor’s “Death or Incompetency”. That rule, which carries
the force and effect of law, provides:
Death or Incompetency of Debtor
If a reorganization, family farmer’s debt adjustment,
or individual’s debt adjustment case is pending under
chapter 11, chapter 12, or chapter 13, the case may be
dismissed; or if further administration is possible and
in the best interest of the parties, the case may
proceed and be concluded in the same manner, so far as
possible, as though the death or incompetency had not
occurred. [Emphasis added.]
Taking into account that Congress used the mandatory form
“shall” in section 1398(i), that Congress put no limitation on
the succession, and that death does not necessarily alter the
identity of the debtor in bankruptcy proceedings strongly, we
hold that petitioners are entitled to deduct on their joint
return for 1994 the NOLs in question. The cases cited by
respondent for a contrary result merely stand for the general
proposition that section 172 shows a general purpose to confine
allowable losses to the taxpayer who sustained them and to treat
those losses as personal and nontransferable to another.4 See,
e.g., New Colonial Ice Co. v. Helvering, 292 U.S. 435, 437 (1934)
4 Respondent relies on Poorbaugh v. United States, 423 F.2d
157 (3d Cir. 1970). We read that case to stand for the
proposition that for a cash basis taxpayer, accounts paid or
received after the taxpayer’s death may not be included in the
taxpayer’s final joint return. The facts of Poorbaugh also are
distinguishable from those of this case. Whereas the taxpayer
there sought to include in the final joint return transactions
that occurred after death, petitioners seek to deduct
expenditures that occurred before Mr. Lassiter’s death.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011