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While many orders appointing receivers have language that explicitly absolve the receiver from the obligation to file tax returns, prospective receivers (and their advisors) need to be aware that language in a state or federal court order is unlikely to shield the receiver from the duty, costs and liabilities attendant upon filing tax returns.  For some reason, although it is over 20 years old, many receivers, as well as their advisors, are unaware of the Supreme Court's decision in Holywell Corporation v. Smith, 503 U.S.47, 112 S.Ct. 1021 (1992).  In Holywell, over the objections of the United States and the debtors, the Bankruptcy Court granted the liquidating trustee under a plan a declaratory judgment that the trustee had no duty under the Internal Revenue Code to file tax returns for the debtors.  While the Court of Appeal affirmed, the Supreme Court reversed.  The Court based its decision on section 6012(b)(3) of the Internal Revenue Code because the trustee was a fiduciary of a trust. This section also explicitly requires "a receiver" that has "possession or holds title to all or substantially all the property or business of a corporation" to file income tax returns for the corporation.  The Service even has a form, Form 56, for receivers to submit upon their appointment. Given the foregoing, it is unlikely that the Service will respect the language in an order appointing a receiver that absolves the receiver from the duty to file the returns and, while Holywell may not be a receiver case, it seems unlikely that a court would do so either.  Bottom line, while it can be a burden given the dilapidated state of many debtor's records, receivers need to budget the cost to have all income tax returns prepared.

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