Chapter 7 Riverside Trustee Karl Anderson
Mr. Anderson is a CPA with his own firm in Palm Springs, California. When your client has a business, Mr. Karl Anderson, Riverside Trustee will ask for the State tax return as well as the Federal tax return. Even if the debtor is filing as an individual, the Trustee will ask for any corporate tax returns on the business. While in most cases, the personal State tax return and Federal tax returns duplicate each other, there is extra information in the State tax returns that will help a Chapter 7 Trustee in his/her investigation.
State Tax return has a depreciation schedule that shows the value of hard assets, such as trucks, inventory, buildings, etc. Inventory of a business is especially problematic for a debtor as the Trustee can easily sell the inventory on the open market for the benefit of the bankruptcy.
If you do not know what items are in the tax return, have your cleint explain to you the items or hire an accountant to explain the items, before you file the bankruptcy case.
Be sure to examine the tax returns all the way through. Sometimes vehicles are listed, buildings, businesses and other important information that your client may forget to tell you about. These hard assets could have value that the Trustee might sell to benefit the bankruptcy estate.
The trustee will look through the entire tax return submitted and then will ask questions about the contents. So be prepared and ask the questions before the trustee asks your client the questions.
I have seen in Chapter 7 Bankruptcy cases where Chapter 7 Trustees have reviewed the tax returns and found houses that were not listed in the petition. These houses have had equity and the trustees were able to obtain the houses as undisclosed assets and the houses were sold to pay off creditors of the estate.