Tax News Update    Email this document    Print this document  

April 19, 2021

IRS declines to follow Tax Court decision holding interest in a pension plan wasn’t an asset for purposes of IRC Section 108 insolvency exclusion

In an Action on Decision (AOD 2021-01), the IRS has announced it will not follow the decision in Schieber v. Commissioner, T.C. Memo. 2017-32, which held that a taxpayer’s interest in a pension plan did not constitute an asset for purposes of the insolvency exclusion under IRC Section 108 because the interest “could not be converted into a lump-sum cash amount, sold, assigned, or borrowed against.” The IRS contends that the Tax Court improperly relied on certain wording in the legislative history and “turning that language into a threshold test not found in the statute itself.” The Tax Court “used this legislative history language to hold that something that falls within the plain meaning of the term asset (in this case, the right to a stream of payments over a taxpayer’s lifetime) is not considered an asset for purposes of section 108(d)(3),” the IRS asserts.