When an individual files a bankruptcy under Chapter 7 or Chapter 11 an election to split the tax year is possible under certain circumstances. 26 USC §1398 allows an individual debtor to terminate the tax year as of the day before the bankruptcy was filed.
1
A Proceeding Must Be Filed under Chapter 7 or Chapter 11.
A short year tax election is only permitted when the debtor has filed under either Chapter 7 or Chapter 11 of the bankruptcy code. The bankruptcy estate created by the case filing must have assets.
2
Only a Person Can Make the Short Year Election
A single, individual debtor or a married couple filing a joint bankruptcy petition is permitted to make the election if other requirements are met.
3
The Election Must Be Made in a Timely Manner
The election must be in writing and filed with with IRS by the 15th day of the fourth month following the month in which the bankruptcy was filed.
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