Case: Withholding Rule Applied to Allocate Tax Refund to Bankruptcy Estate (Bankr. E.D. Mich.) (IRC §6402)

July 30, 2021, 5:00 AM

The majority Withholding Rule, rather than the minority 50/50 Rule, applies to allocate a federal income tax refund to the spouse who made the tax payments which in turn becomes part of the bankruptcy estate, a district court held. Prior to filing Chapter 7 bankruptcy, Debtor and his non-debtor spouse filed a tax return claiming a refund. After the filing, the IRS sent the refund. Trustee claims the refund is part of the bankruptcy estate. Debtor contends that 50% is outside of the estate belonging to the non-debtor spouse. The parties agree that whatever portion of he refund belongs to ...

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