Trustee wants to know about previous tax returns

[psears123]

Hello,
Doing a Chapter 7 and the trustee wants the tax returns for my S corp business going back to 5 years, to see if there are any business losses from this year that can be carried back; obstensibly to see if we can amend those returns to create a refund that he can then claim for the creditors.
I thought there was a time limit on how far back the trustee could claim money-yes or no?

[Flamingo]

A trustee can go back as far as they wish for any information pertaining to your finances or business.

[justbroke]

Doing a Chapter 7 and the trustee wants the tax returns for my S corp business going back to 5 years, to see if there are any business losses from this year that can be carried back; obstensibly to see if we can amend those returns to create a refund that he can then claim for the creditors.

I thought there was a time limit on how far back the trustee could claim money-yes or no?

That's a very smart Trustee! The Net Operating Loss (NOL) can be carried back for years. The Trustee is entitled to anything which you are entitled to! The Trustee can go back as far as necessary to claim "current" property of the Estate. That's totally within their scope. It's not typical, but they can if they are attempting to recover assets.

You may be confusing the "look back" with the scope of their powers to recover assets. The look back relates to how far back for conveyances and transfers. When looking for other assets... they can go as far as necessary.

[backtoschool]

I agree with Flamingo and justbroke. If the trustee sees a possibility of claiming a refund from past years amended returns, then it is totally within the trustee's scope of power to ask for past returns. This would not affect your bankruptcy negatively, except perhaps to turn it into an asset case and make the timeline longer for closing. Your discharge would still happen on time though.

[daylate]

Couple of things- A NOL can usually only be carried back for 2 years and forward for 20 years. (As far as I can tell for tax year 2008 you could elect a five year carryback but you had to file a form by a certain date in order to do so). There are some exceptions but this is in general (See IRS PUb 536 for details). Secondly amended returns can only be filed up to 3 years after the original due date so anything in 2007 and 2006 is beyond the limit. Thirdly, the S Corp does not get an NOL. I would check all this out with a very sharp tax accountant but I don't see 2010 losses affecting anything other than 2010 return/refund.

[psears123]

Yes, a relative who is a tax CPA mentioned something regarding that. I will have to read up on that so I know what to hit him with on the next 341 meeting. Thanks for the reply!

[justbroke]

Thirdly, the S Corp does not get an NOL.

The issue is not on carrybacks (or forward) of an NOL. The real issue is whether the Trustee can request tax returns dating back beyond 2 years for a business. Yes, they can. If it's an S-Corp, the income/losses are passthru anyhow so this isn't a corporate tax issue.

The Trustee is simply looking for money. It would be the Trustee's tax attorney's job to figure out what they can or can not recover. As a debtor you shouldn't even be worried about any of this, other than providing the Trustee with the requested documentation.

[tobee43]

we were asked for 3 years on the S-Corp, which was filed seperately than our personal. as jb points out, assets were exactly what the trustee was looking for. we had none, but i'm certainly the courts wanted to be certain, and in a way, i don't blame them.