Bankruptcy and Insolvency Accounting, Volume 1

Grant W. Newton, CPA, CIRA, CMA, is Professor of Accounting at the Graziadio School of Business and Management at Pepperdine University and is Executive Director of the Association of Insolvency and Restructuring Advisors. He is the author of Corporate Bankruptcy: Tools, Strategies, and Alternatives (2003) and Bankruptcy and Insolvency Taxation (2005), both from Wiley. His articles have appeared in a large number of professional periodicals. He received his PhD from New York University, Master's from the University of Alabama, and BS from the University of North Alabama.

Preface xxxv

Acknowledgments xxxix

About the Author xli

PART ONE BANKRUPTCY AND INSOLVENCY ENVIRONMENT 1

1 Accountant’s and Financial Advisor’s Role in Perspective, 3

1.1 Introduction, 3

1.2 Scope of Coverage, 4

Accounting Services, 5

1.3 Need for Financial Advisor’s Services, 5

1.4 Financial Advisor Defined, 6

Topical Overview, 7

1.5 Economic Causes of Business Failure, 7

1.6 Business Turnaround, 7

1.7 Alternatives Available to a Financially Troubled Business, 7

1.8 Comparison of Title 11 of the United States Code with the Bankruptcy Act, 11

1.9 Retention of the Financial Advisor and Fees, 13

1.10 Accounting Services, 14

1.11 Special Investigation and Financial Reporting, 14

1.12 Tax Awareness, 14

Responsibilities of Independent Accountant, 15

1.13 Responsibilities in General, 15

1.14 Observation of Business Decline, 15

1.15 Responsibility to Client, 16

1.16 Advice on Selection of Attorneys, 17

1.17 Other Steps to “Manage” the Proceedings, 18

Professional Certification, 18

1.18 Certified Insolvency and Restructuring Advisors, 18

1.19 Certification in Distressed Business Valuation, 20

2 Economic Causes of Business Failures, 21

2.1 Introduction, 21

Definition of Successful and Unsuccessful Business, 21

2.2 Failure Defined, 21

2.3 Business Failure Statistics, 23

Causes of Financial Difficulty, 24

2.4 Introduction, 24

2.5 Size of Business Failures, 26

2.6 Geographic Distribution of Business Failures, 29

2.7 Age of Business Failures, 30

2.8 Business Failures and Economic Conditions, 30

2.9 Characteristics of the Economic System, 33

2.10 Casualties, 34

2.11 Inside Underlying Causes, 34

2.12 Dishonesty and Fraud: Planned Bankruptcies, Sham, 42

2.13 Other External Causes, 42

Stages of Financial Failure, 43

2.14 Introduction, 43

2.15 Period of Incubation, 44

2.16 Cash Shortage, 45

2.17 Financial or Commercial Insolvency (Equity Definition), 45

2.18 Total Insolvency (Bankruptcy Definition), 45

2.19 Bankruptcy or Out-of-Court Workout, 45

Detection of Failure Tendencies, 46

2.20 Introduction, 46

2.21 Trend Analysis, 46

2.22 Analysis of Accounting Measures, 48

2.23 Analysis of Management, 64

2.24 Importance of Forecasts, 64

2.25 Other Factors, 65

PART TWO LEGAL ASPECTS OF BANKRUPTCY AND INSOLVENCY PROCEEDINGS 67

3 Turnaround Process, 69

3.1 Objectives, 69

Stages of Turnaround Process, 69

3.2 Introduction, 69

3.3 Stage 1: Management Change, 71

3.4 Stage 2: Situation Analysis, 72 Competitive Ability, 77

3.5 Stage 3: Design and Selection of Turnaround Strategy, 78

3.6 Stage 4: Emergency Action Stage, 81

3.7 Stage 5: Business Restructuring Stage, 87

3.8 Stage 6: Return-to-Normal Stage, 89

Characteristics of Effective Turnaround Managers, 90

3.9 Introduction, 90

3.10 Organizational Leader, 91

3.11 Ability to Develop and Implement Strategy, 91

3.12 Entrepreneurial Instincts, 91

3.13 “Hands-On” Operating Experience, 91

3.14 Effective Negotiating Skills, 92

3.15 Good Interviewing Skills, 92

3.16 Action Orientation, 92

3.17 Trustworthiness and Fairness, 93

Techniques Used in Business Turnarounds, 94

3.18 Introduction, 94

3.19 Lean Manufacturing, 94

3.20 Activity-Based Costing, 98

3.21 Retail Store “Four-Wall” Analysis, 102

3.22 Business Process Reengineering, 108

Summary and Recommendations, 109

3.23 Summary, 109

4 Nonbankruptcy Proceedings, 111

4.1 Introduction, 111

Out-of-Court Settlements, 111

4.2 Nature of Proceedings, 111

4.3 Importance of an Early Meeting Date, 113

4.4 Preparation for the Creditors’ Meeting, 113

4.5 Appointment of Creditors’ Committee, 114

4.6 Duties and Functions of Creditors’ Committee, 115

4.7 Interim Management, 116

4.8 Committee Management, 116

Preparation of a Plan of Settlement, 118

4.9 Introduction, 118

4.10 Conditions of Agreement, 119

4.11 Out-of-Court Agreement Prior to Chapter 11 (Prepackaged Bankruptcy), 120

Advantages and Disadvantages, 121

4.12 Advantages, 121

4.13 Disadvantages, 121

Assignment for the Benefit of Creditors (State Court), 122

4.14 Introduction, 123

4.15 Duties, Functions, and Procedures of Assignee, 122

4.16 Discharge of Debts, 123

4.17 Advantages, 124

4.18 Disadvantages, 125

5 Nature of Bankruptcy and Insolvency Proceedings, 127

Origin, 127

5.1 Introduction, 127

5.2 United States, 128

5.3 Insolvency and Bankruptcy Laws Today, 130

5.4 Current Bankruptcy Statistics, 132

Nature of Insolvency, 134

5.5 Types of Insolvency, 134

5.6 Equity versus Bankruptcy Meanings of Insolvency, 135

5.7 Determination of Assets and Liabilities, 135

5.8 Valuation of Assets, 136

5.9 Insolvency and the Bankruptcy Code, 136

5.10 Should There Be a Threshold Test?, 137

5.11 Alternatives Available to a Financially Troubled Business, 139

Assignment for the Benefit of Creditors (State Court), 140

5.12 Introduction, 140

5.13 Duties, Functions, and Procedures of Assignee, 140

5.14 Discharge of Debts, 141

5.15 Advantages, 142

5.16 Disadvantages, 142

Provisions Common to all Proceedings, 143

5.17 Introduction, 143

5.18 Bankruptcy Courts, 144

5.19 U.S. Trustee, 146

5.20 Sovereign Immunity, 149

5.21 Commencement of Cases, 154

5.22 Filing and Quarterly Fees, 156

5.23 Partnership, 157

5.24 Meeting of Creditors, 158

5.25 Meeting of Equity Security Holders, 159

5.26 Adequate Protection, 159

5.27 Automatic Stay, 164

5.28 Use of the Estate’s Property, 174

5.29 Executory Contracts and Leases, 175

5.30 Utility Service, 193

5.31 Allowance of Claims or Interests, 196

5.32 Expense of Administration, 202

5.33 Priorities, 205

5.34 Exemptions, 207

5.35 Discharge of Debts, 211

5.36 Property of the Estate, 213

5.37 Avoiding Power of Trustee, 220

5.38 Reclamation and 503(b)(9) Claim, 222

5.39 Preferences, 226

5.40 Fraudulent Transfers, 249

5.41 Postpetition Transfers, 258

5.42 Postpetition Effect of Security Interest, 259

5.43 Setoffs, 260

Chapter 7 Liquidation, 263

5.44 Filing the Petition, 263

5.45 Trustee, 264

5.46 Creditors’ Committee, 266

5.47 Partnerships, 267

5.48 Treatment of Tax Liens, 269

5.49 Liquidation of Assets, 269

5.50 Discharge, 271

5.51 Discharge of Environmental Claims, 278

SIPC Liquidation, 278

5.52 Introduction, 278

5.53 Determination of Need of Protection, 279

5.54 Appointment of Trustee, 280

5.55 Court Jurisdiction, 280

5.56 Powers and Duties of Trustee, 283

5.57 Satisfaction of Claims, 284

5.58 Prohibited Acts, 286

5.59 Role of Securities and Exchange Commission, 287

5.60 Compensation in an SIPA Action, 288

6 Rehabilitation Proceedings Under the Bankruptcy Code, 289

6.1 Introduction, 289

6.2 Purpose of Chapter 11, 289

Operating Under Chapter 11, 290

6.3 Role of the Court and U.S. Trustee, 290

6.4 KERPs, 292

6.5 Consolidation of Chapter 11 Petitions, 296

6.6 Creditors’ and Equity Holders’ Committees, 302

6.7 Appointment or Election of Trustee, 309

6.8 Appointment of Examiner, 314

6.9 Operation of the Business, 318

6.10 Automatic Stay, 319

6.11 Impact of Timbers, 319

6.12 Use of Collateral, 320

6.13 Use of Cash Collateral, 320

6.14 Obtaining Credit, 322

6.15 Claims and Interests, 330

6.16 Special Provisions for Partially Secured Creditors, 340

Developing the Plan, 342

6.17 Negotiating a Chapter 11 Plan, 343

6.18 Exclusivity Period, 344

6.21 Secured Claim Classification, 356

6.22 Interest Classification, 357

6.23 Content of the Plan, 357

6.24 Permissible Provisions, 359

6.25 Impairment of Claims, 361

6.26 Disclosure Statement, 364

6.27 Modification of the Plan, 373

Confirmation of the Plan, 375

6.28 Acceptance of the Plan, 375

6.29 Confirmation Hearing, 375

6.30 Confirmation Requirements, 376

6.31 Best Interest of Creditors, 378

6.32 Priority Treatment, 379

6.33 Feasibility, 381

6.34 Cramdown, 385

6.35 Chapter 11 Cases Filed by Individuals, 394

Postconfirmation, 397

6.36 Impact, 397

6.37 Distribution, 400

6.38 Discharge of Debts, 401

6.39 Postconfirmation Recovery, 401

6.40 Securities Law Exemption, 402

6.41 Final Decree, 404

6.42 Conversion to Chapter 7 or Dismissal, 405

6.43 Advantages and Disadvantages of Chapter 11, 407

Chapter 12: Adjustment of Debts of a Family Farmer with Regular Annual Income, 407

6.44 Purpose, 407

6.45 Requirements for Use, 408

6.46 Operation of Farm, 408

6.47 Chapter 12 Plan, 409

Chapter 13: Adjustment of Debts of an Individual with Regular Income, 411

6.48 Nature, 411

6.49 Filing of Petition, 411

6.50 Operation of Business, 413

6.51 The Plan, 413

6.52 Discharge of Debts, 417

6.53 Use of Chapter 13 by Business, 418

6.54 Chapter 15: Ancillary and Other Cross Border Cases, 419

7 Retention of the Financial Advisor and Fees, 427

7.1 Introduction, 427

Retention of the Financial Advisor, 428

7.2 The Accountant or Financial Advisor’s Role in the Proceedings, 428

7.3 Obtaining the Engagement, 428

7.4 Retention Procedure, 429

7.5 Creditors’ Committee, 432

7.6 Source of Payment, 433

7.7 Affidavit of Proposed Financial Advisor, 434

7.8 Survey of Work to Be Performed, 440

7.9 Application for Retention, 441

7.10 Retention Order, 444

7.11 Retention on a Retainer Basis, 444

7.12 Deviations from Retention Order, 445

7.13 Accountants as Consultants or Financial Advisors, 445

7.14 Prepetition Retention, 446

7.15 Retention Procedure—Informal, 446

7.16 Accountants as Quasi-Officers of the Court, 447

Determination of Financial Advisor’s Fees, 447

7.17 Introduction, 447

7.18 SEC May Object to Fees, 448

7.19 Compensation Reviewed by U.S. Trustee, 449

7.20 Compensation Must Be Approved by the Court, 449

7.21 Factors to Consider When Estimating Fees, 453

7.22 Compensation Based on Comparable Services, 458

7.23 Prepetition Fees, 460

Time Records, 461

7.24 Requirements, 461

Petition for Fee Allowance, 462

7.25 Court Discretion in Ruling on Fees, 462

7.26 Procedure for Filing the Petition, 465

7.27 Payment for Services Rendered, 466

8 Accounting and Financial Services for Debtors-in-Possession or Trustee, 469

Nature of Accounting Services, 469

8.1 Introduction, 469

8.2 Parties Retaining Accountants and Financial Advisors, 469

8.3 Summary of Services, 471

Prefiling Stage of Chapter Proceedings, 472

8.4 Importance of Early Meetings, 472

8.5 Advice on Selection of Counsel, 473

8.6 Conference with Attorney, 473

8.7 Determine Alternatives, 474

8.8 Prebankruptcy Planning, 475

Accounting/Financial Reporting Requirements, 481

8.9 Introduction, 481

8.10 Affidavits in Support of Petition, 483

8.11 Supporting Schedules, 484

8.12 Statement of Financial Affairs, 487

8.13 Monthly Reporting, 488

8.14 U.S. Trustee’s Requirements, 489

8.15 Operating Statements, 490

8.16 SEC Reporting in Chapter 11, 492

8.17 Bankruptcy Claims Management Process, 495

Formulation of a Plan of Reorganization, 499

8.18 Introduction, 499

8.19 Liquidation Value of Assets, 500

8.20 Projection of Future Operations, 501

8.21 Reorganization Value, 501

8.22 Pro Forma Balance Sheet, 502

8.23 Formulating an Amended Plan, 503

8.24 Disclosure Statement, 503

Accountant and Financial Advisor as Examiner, 504

8.25 Nature of Service, 504

Additional or Other Accounting Services, 505

8.26 Introduction, 505

8.27 Normal Accounting Services, 505

8.28 Special Investigation, 505

8.29 Accounting Services and the Granting of New Credit, 507

Professional Conduct of Accountants and Financial Advisors, 508

8.30 Introduction, 508

8.31 Personal Liability: Preparation of Financial Statements, 508

8.32 Professional Conduct of Debtor’s Accountant— Toward Client, 509

8.33 Professional Conduct of Debtor’s Accountant— Toward Creditors’ Accountant/Advisors, 510

8.34 Direct Liability to Third Parties, 511

8.35 Other Professional Ethical Factors, 511

9 Other Financial Advisory Services for Debtors-in-Possession or Trustee, 513

9.1 Introduction, 513

Management Advisory Services, 513

9.2 Introduction, 513

9.3 Long-Range Business Plan, 514

9.4 Financial Projections, 516

Interim Management Services, 516

9.5 Introduction, 516

9.6 Retention, 517

9.7 Billing, 517

Balloting and Noticing Agent Services, 517

9.8 Noticing Overview, 517

9.9 Solicitation Overview, 518

9.10 Pre-Balloting Services, 519

9.11 Plan Classes, 519

9.12 Solicitation Process, 520

9.13 Plan Information and Ballots, 520

Chapter 7 and Chapter 11 Liquidations, 521

9.14 Introduction, 521

9.15 Items Requiring Immediate Attention, 521

9.16 Performance of Audits and Other Special Investigations, 522

9.17 SIPC Liquidation, 522

Postconfirmation Services, 523

9.18 Overview, 523

9.19 Litigation Trusts, 523

9.20 Tort Trusts, 523

10 Accounting and Financial Services for the Creditors’ Committee, 525

Nature of Creditors’ Committee, 525

10.1 Introduction, 525

10.2 Creditors’ Committees, 526

10.3 Directing Committee Activities, 534

10.4 Data, 535

10.5 Bargaining Process, 535

10.6 Role of Creditors’ Financial Advisor in the Bargaining Process, 536

10.7 Form of Consideration, 537

Monitoring Debtor’s Activities, 537

10.8 Introduction, 537

10.9 Areas Requiring Immediate Attention, 537

10.10 Importance of Speed, 538

10.11 Establishment of Proper Controls, 539

10.12 Investigation of Causes of Failure and Development of Controls to Limit Further Impairment of Assets, 540

10.13 Review of Receipts and Disbursements Control, 540

10.14 Review of Debtor’s Accounting System, 541

10.15 “Insider” Problem, 542

10.16 Review of Weekly/Monthly Reporting, 544

Special Investigations and Reviews, 545

10.17 Investigation of Debtor’s Books and Records, 545

10.18 Review of Debtor’s Transactions, 546

10.19 Evaluation of Debtor’s Projections, 546

10.20 Review of Plan of Reorganization and Disclosure Statement, 547

Other Accounting Services, 550

10.21 Introduction, 550

10.22 Secured Creditor, 550

10.23 Major Stockholder or Equity Committee, 550

10.24 Responsibilities of Creditors’ Financial Advisor, 551

11 Valuation of a Business in Bankruptcy Proceedings, 553

Importance of Valuation, 553

11.1 Introduction, 553

11.2 Adequate Protection under Section 361, 554

11.3 Claims Determination, 558

11.4 Recovery Action, 561

11.5 Chapter 13 Secured Claims, 567

11.6 Determining Best Interest of Creditors and Stockholders under Chapter 11, 568

11.7 Determining Whether a Plan Is Fair and Equitable to a Dissenting Class in Chapter 11, 569

11.8 Determining Feasibility, 573

11.9 Codification of Value, 573

Liquidation Values, 575

11.10 Introduction, 575

11.11 Approaches, 577

Going-Concern (Reorganization) Valuation, 578

11.12 Introduction, 578

11.13 Cost of Capital, 579

11.14 Appraisal Value or Replacement Cost, 588

11.15 Market Value of Securities, 588

11.16 Income Approach (Discounted Cash Flows), 589

11.17 Market Approach, 596

11.18 Asset-Based (Cost) Approach, 607

11.19 Discounts and Premiums, 612

11.20 Synthesizing Results, 618

11.21 Determining Liabilities, 622

PART THREE INVESTIGATION AND REPORTS

12 Special Areas of Inquiry, 627

Nature of Investigation, 627

12.1 Introduction, 627

12.2 Objectives, 628

12.3 Balance Sheet Emphasis, 629

12.4 Modifications of Investigation, 629

Introduction to the Special Areas of Inquiry, 631

12.5 Irregularities, 631

12.6 Fraud, 633

12.7 Proof of Fraud, 634

12.8 Auditor’s Responsibility for the Detection of Irregularities, 634

12.9 Methods of Discovering Irregularities and Fraud, 640

Availability of Books and Records, 641

12.10 Locating and Obtaining Possession of the Records, 641

12.11 Scheduling the Books; Procedure Followed for Missing Records, 642

Fraudulent Transfers, 642

12.12 Transfer of Assets without Fair Consideration, 642

12.13 Sales of Assets Below Market Values, 643

12.14 Transfer of Assets to Insiders, Officers, Employees, Relatives, and Others, 643

Concealment of Assets, 648

12.15 Merchandise, 648

12.16 Cash Surrender Value of Officers’ Life Insurance Policies, 650

12.17 Deposits and Security, 651

12.18 Investments and Real Estate, 651

12.19 Machinery and Equipment, 652

False Entries and Statements, 652

12.20 Mutilation and Alteration of Records, 652

12.21 Concealment and Destruction of Records, 653

12.22 Forgery, 653

12.23 Issuance of False Statements, 653

Financing Irregularities, 657

12.24 Receivables, 657

12.25 Inventory, 659

Preferential Payments, 660

12.26 Introduction, 660

12.27 Recovery of Preferential Payments, 661

12.28 Search for Preferential Payments, 662

12.29 Inflated Claims, 663

Applicability of Generally Accepted Auditing Standards, 664

12.30 Auditing Standards, 664

12.31 Auditing Procedures, 665

12.32 Audit Program Guide, 666

13 Financial Reporting During Bankruptcy, 667

13.1 Introduction, 667

Form and Substance of Financial Statements, 668

13.2 Financial Data Required at the Date of Filing of Petition in Chapter 11, 668

13.3 Balance Sheet, 668

13.4 Rejected Leases, 677

13.5 Warranty Reserves and Similar Liabilities, 678

13.6 Pension Liability, 679

13.7 Pro Forma Statement of Financial Position, 681

13.8 Notes to Statements, 681

13.9 Statement of Operations, 682

13.10 Statement of Cash Flows, 687

13.11 Statement of Capital Deficiency, 689

13.12 Statement of Affairs, 689

13.13 Special-Purpose Statements, 693

Accounting for a Chapter 11 Filing, 694

13.14 Use of New Accounts, 694

13.15 Illustration of Entries, 696

13.16 Accrued Interest, 697

14 Reporting Results of the Plan, 699

14.1 Introduction, 699

Chapter 11, 699

14.2 Requirements for Fresh-Start Reporting, 699

14.3 Allocation of Reorganization Value, 701

14.4 Disclosures, 704

14.5 Recording the Adoption of Fresh-Start Reporting, 705

14.6 Deferred Taxes, 708

14.7 Disclosure Statement, 710

14.8 Subsequent Events and Preconfirmation Contingencies, 711

14.9 Reporting by Entities Not Qualifying for Fresh Start, 714

14.10 Comparison with Prior Periods, 714

Out-of-Court Workouts, 715

14.11 Introduction, 715

14.12 Debt Discharge under FASB Statement No. 15, 715

14.13 Reporting of Income from Debt Discharge When FASB Statement No. 15 Is Not Applicable, 723

14.14 Determining the Amount of Income from Debt Discharge When FASB Statement No. 15 Is Not Applicable, 724

Quasi-Reorganization, 724

14.15 Introduction, 724

14.16 Adjustment of Equity Section Only (“Mini Quasi”), 725

14.17 Adjustment of All Accounts, 726

14.18 Conditions Necessary for Quasi-Reorganization, 729

14.19 Quasi-Reorganization and the SEC, 729

15 Reporting on an Insolvent Company, 731

15.1 Introduction, 731

Litigation Services, 734

15.2 Application of Litigation Services to Bankruptcy, 734

15.3 Disclosure Requirements, 736

15.4 Operating Reports, 736

15.5 Investigative Services, 737

15.6 Financial Projections, 738

Accountant’s Report: Nonlitigation Services, 739

15.7 Introduction, 739

15.8 Limitations on Scope, 740

15.9 Unique Disclosures in Report, 741

15.10 Full Disclosure, 742

15.11 Accountant’s Responsibility for Disclosure, 743

Going-Concern Concept, 743

15.12 Introduction, 743

15.13 Going-Concern Concept Defined, 744

15.14 Absence of Evidence to the Contrary, 745

15.15 Auditor’s Responsibility for Evaluation, 746

15.16 Audit Procedures, 746

15.17 Consideration of Management’s Plans, 747

Types of Opinions, 748

15.18 Unqualified Opinion, 748

15.19 Qualified Opinion, 749

15.20 Disclaimer of Opinion, 750

15.21 Adverse Opinion, 750

15.22 Reports Relating to the Results of Applying Agreed-On Procedures, 751

Unaudited Financial Statements, 753

15.23 Introduction, 753

15.24 Public Entity Report, 753

15.25 Nonpublic Entity Reports, 756

Reporting on a Liquidation of the Debtor, 762

15.26 Introduction, 762

15.27 Single-Year Report, 763

15.28 Comparative Financial Statements, 764

15.29 Solvency Letters, 764

15.30 Reports on Prospective Financial Statements, 765

15.31 Liquidation Analysis, 765

16 Tax Awareness, 767

16.1 Introduction, 767

Notification of Proceedings and Filing of Returns, 767

16.2 Notice to Governmental Agencies, 767

16.3 Responsibility for Filing Income Tax Returns: Corporations, 768

16.4 Responsibility for Filing Income Tax Returns and Other Information Required by the Bankruptcy Court: Individual and Partnership, 769

Special Rules for Individuals, 774

16.5 Introduction, 774

16.6 Income and Deductions, 774

16.7 Transfers between Debtor and Estate, 775

16.8 Attribute Carryover to Estate, 778

16.9 Attribute Carryover to Debtor, 778

16.10 Carryback of Net Operating Losses and Other Credits Incurred Subsequent to Commencement of Case, 779

16.11 Administrative Expenses, 779

16.12 Change in Accounting Period, 782

Minimization of Tax and Related Payments, 782

16.13 Estimated Taxes, 782

16.14 Prior Year Taxes, 782

16.15 Pension Funding Requirements, 782

Treatment of Income During Bankruptcy Period, 782

16.16 Income Required to Be Reported, 782

16.17 Deductions Allowed, 783

16.18 Discharge of Debts, 784

16.19 Debt Discharge by Farmers, 788

16.20 Cancellation of Real Property Business Indebtedness, 789

16.21 Basis Adjustment, 790

16.22 Debt Discharge by Partnerships, 793

16.23 Debt Discharge by S Corporations, 793

16.24 Exchange of Stock for Debt, 793

16.25 Purchase-Money Debt Reduction, 794

16.26 Tax Planning, 794

Corporate Reorganizations, 794

16.27 Introduction, 794

16.28 Tax-Free G Reorganization, 795

16.29 Personal Holding Company, 797

Availability of New Operating Losses, 797

16.30 Introduction, 797

16.31 Section 382 Limitation, 798

16.32 Special Rules for Corporations in Bankruptcy, 799

16.33 Other Provisions, 800

Effects on Earnings and Profits, 801

16.34 Introduction, 801

16.35 Account Adjustment, 801

16.36 Earnings and Profits Carryover, 801

Administrative Aspects of Taxes, 802

16.37 Tax Priorities, 802

16.38 Tax Penalty, 809

16.39 Interest, 810

16.40 Erroneous Refunds or Credits, 810

16.41 Chapter 11 Reorganization, 810

16.42 Chapters 12 and 13 Adjustments, 811

16.43 Tax Discharge, 811

16.44 Tax Preferences, 813

16.45 Tax Procedures, 813

16.46 State and Local Tax Provisions, 814

Appendix: Statement of Position 815

Statutes Citations 849

Case Index 855

Name Index 865

Subject Index 867