- 6 -
whether he or the bankruptcy estate bore the tax consequences of
the foreclosure. Respondent argues that petitioner’s residence
was property of the bankruptcy estate at the time of the
foreclosure and thus any interest paid in the foreclosure was
deductible solely by the estate. Petitioner argues that the
property was removed from the estate when the bankruptcy court
granted Wells Fargo’s request for a relief from stay.
A bankruptcy estate is created as a separate taxable entity
upon the filing by an individual of a chapter 11 bankruptcy
petition. See sec. 1398.3 The estate comprises all legal and
equitable interests of the debtor in property. See 11 U.S.C.
sec. 541.4
Petitioner argues that his residence was effectively
abandoned by the estate when the bankruptcy court granted Wells
Fargo’s motion for a relief from stay. Both parties agree that
the disposition of property abandoned by a trustee in bankruptcy
will produce no tax consequences for the bankruptcy estate. See
3Sec. 1398 was added by sec. (3)(a)(1) of the Bankruptcy Tax
Act of 1980, Pub. L. 96-589, 94 Stat. 3389, 3397-3400, and is
applicable to bankruptcy cases commencing on or after Mar. 25,
1981. See Bergman v. Commissioner, T.C. Memo. 1985-256.
411 U.S.C. sec. 541 (1994) provides, in relevant part:
(a) The commencement of a case under section 301, 302,
or 303 of this title creates an estate. Such estate is
comprised of all the following property, wherever
located and by whomever held:
(1)* * * all legal or equitable interests of the
debtor in property as of the commencement of the case.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
Last modified: May 25, 2011