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In re Stadler Associates, Inc. involved a voluntary petition
under chapter 7 of the Bankruptcy Code. In this case, V&M
Management filed a voluntary petition under chapter 11 of the
Bankruptcy Code. Although the remedies sought in a chapter 7
liquidation proceeding are different from those in a chapter 11
reorganization proceeding, this difference does not affect
application of the rationale stated in In re Stadler Associates,
Inc. to both types of bankruptcy proceedings.
Likewise, no new or separate taxable entity was created by
the filing of the bankruptcy petition. Section 1399 provides:
“Except in any case to which section 1398 applies, no separate
taxable entity shall result from the commencement of a case under
title 11 of the United States Code.” Section 1398 is
inapplicable since it applies exclusively to individuals. The
legislative history explains:
The bill provides that no taxable entity results
from commencement of a bankruptcy case involving a
partnership or corporation. This rule * * * reverses
current Internal Revenue Service practice as to
partnerships, under which the estate of a partnership
in bankruptcy is treated as a taxable entity (Rev. Rul.
68-48, 1968-1 C.B. 301) * * * [H. Rept. 96-833, at 20-
21 (1980).8]
8See also 11 U.S.C. sec. 346(c) (2000) (“The commencement of
a case under this title concerning a corporation or a partnership
does not effect a change in the status of such corporation or
partnership for the purpose of any State or local law imposing a
tax on or measured by income.”).
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