Bankr. M.D.N.C.: In re DeCoro USA, Ltd.- Determination of Tax Refund under 11 U.S.C. § 505

Summary: Following City of Perth Amboy v. Custom Distrib. Serv., Inc. (In re Custom Distrib. Serv., Inc.), 224 F.3d 235, 243-44 (3d Cir. 2000), the bankruptcy court held that a Debtor must “must have properly requested [a] tax refund ... in order for [a bankruptcy] court to have the jurisdiction to determine and order the payment of such refund.” The Debtor applied for a tentative carry back adjustment to the IRS pursuant to 26 U.S.C. § 6411, by completing Form 1139. This, however, did not constitute a claim for a refund sufficient to “vest the [court] with jurisdiction to order the payment of a refund.” Instead a corporate tax payer must make a formal claim for a tax refund using Form 1120 (X). Treas. Reg. § 301.6402-3 (a) (3) (1997). The bankruptcy court also held that although the Debtor’s tax transcripts indicated that the tentative carryback adjustment have been processed and approved. This misinterpreted the tax transcripts which were coded as a tentative decision, “which is all that the IRS could do without a [refund] claim having been presented” using Form 1120(X). The Debtor, in order to have a timely claim for a refund, argued that its Chapter 11 plan, the Form 1139 application, and the numerous references to the anticipated refund in its bankruptcy pleadings, should be considered an “informal claim.” In order to be considered an “informal claim it must: (1) be in writing; and (2) "fairly advis[e] the Commissioner of the nature of the taxpayer’s claim." United States v. Kales, 314 U.S. 186, 194 (1941). Form 1139 cannot, the court found, be an informal claim as that “would obliterate the distinction between a tentative application and a formal claim for a refund." I.C.T.S. U.S.A., Inc., 2007 WL 512791(S.D.N.Y. Feb. 15, 2007). The Chapter 11 Plan, the interrogatories served on the IRS and the other various pleadings also failed, alone or taken together, as they did not “pin-point the area of dispute” sufficient to be considered an informal claim for a tax refund. For a copy of the opinion, please see: DeCoro USA, Ltd.- Determination of Tax Refund under 11 U.S.C. § 505.pdf