Bankruptcy filing does not suspend assessment period before deficiency notice

Plain-English summary

Chief Counsel advised that filing a bankruptcy petition does not suspend the assessment statute of limitations when no notice of deficiency has been issued. The automatic stay does not prohibit a tax assessment or the issuance of a deficiency notice, but it can indirectly prevent assessment after a notice is issued because the debtor cannot petition the Tax Court during the stay. The 90-day Tax Court period is extended during the stay and for 60 days afterward, and the assessment period is suspended while the IRS is prohibited from assessing plus 60 days.

Ruling snapshot

• Question: How does a bankruptcy stay affect the IRS assessment statute of limitations when a deficiency notice is issued?
• Outcome: Advice given, the assessment period is suspended only during the period the IRS is prohibited from assessing, plus 60 days
• Key authorities: IRC §§ 6213(a), 6213(f)(1), 6501, 6503(a)(1), and 6503(h)(1); 11 U.S.C. § 362

Full text (IRS public release)

ID: CCA-581833-13
Office: --------------
UILC: 6501.00-00
Number: 201411031
Release Date: 3/14/2014
From: ------------------
Sent: Wednesday, May 08, 2013 6:33 PM
To: ---------------
Cc:
Subject: RE: Quick question – Effect of Bkty Petition Assmt SOL

Hi -------- - I agree that the filing of a bankruptcy petition doesn't suspend the assessment SOL if
a notice of deficiency hasn't been issued. BC 362(b)(9)(D) provides that the automatic stay
doesn't prohibit the making of a tax assessment, and section 362(b)(9)(B) provides that the stay
doesn't prohibit the issuance of a notice of deficiency. Once an SN is issued, however, the IRS
is indirectly prohibited by the stay from assessing a deficiency during the time the debtor is
prohibited by section 362(a)(8) from filing a Tax Court petition. (Note: Prior to the Bankruptcy
Act of 1994, the IRS was directly prohibited by the automatic stay from making assessments.
Because the BC now allows assessments, the SOL on assessments is no longer suspended by
reason of a bankruptcy case pursuant to IRC 6503(h)(1).)
Section 362(a)(8) prevents an individual debtor from filing a petition in Tax Court concerning a
prepetition tax while the stay is in effect. When this happens, IRC 6213(f)(1) suspends the
running of the 90-day period to petition Tax Court while the stay is in effect, plus 60 days. When
a statutory notice is issued while the stay is in effect, the taxpayer has 150 days to file a petition
in Tax Court after the stay ends. Because the IRS is prohibited by IRC 6213(a) from assessing a
deficiency during the time the taxpayer has to petition Tax Court, the filing of a bankruptcy
petition has the effect of indirectly preventing the IRS from making an assessment. IRC
6503(a)(1) suspends the running of the SOL on assessment during the time the IRS is
prohibited from making an assessment, and for 60 days thereafter.
This issue is discussed in the Chief Counsel Bankruptcy Practice Deskbook on pp. 2-21 to 2-22.
I hope this answers your question. Feel free to contact me, however, should you have any
questions regarding the above.

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