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Use this handbook to collect accounts resulting
from estate taxes, decedent liabilities, and insolvencies (other than those
under bankruptcy law).

The purpose of this handbook is to establish procedures
and to provide information to assist in collection efforts.

It contains instructions for employees throughout
the collection organization who are responsible for taking needed actions
at various points in the collection process. It covers instructions for:

Use the Legal Reference Guide and confer with
Technical Services Advisory and/or Counsel when working decedent or insolvent
taxpayers. Procedures may vary and require local modification based on specific
legal requirements.

This is the introductory section to the handbook.
It contains general background information and procedures equally applicable
to decedent cases, estate tax cases, and several common types of insolvencies.
Other sections within this handbook provide detailed specific procedures and
describe their applicability.

Working accounts on deceased taxpayers is one
of the more complex and challenging tasks expected from Collection employees.
Many procedures for decedent cases are different from those for estate taxes
because the nature of the liabilities differ.

The following table describes some basic differences
in the two:

Federal law shielding financially troubled individuals
and businesses was significantly changed by passage of the Bankruptcy Code
in 1978.

The Bankruptcy Code (Title 11 of the United States
Code) greatly expanded and liberalized protections afforded debtors by the
United States. Bankruptcies increased dramatically and other types of financial
restructuring or liquidations involving the Service occur less frequently.
The most common are:

Since property rights are determined under state
law, jurisdiction over administration of most insolvency, decedent, and estate
cases lies with state courts.

When the Service is informed of an insolvency
or decedent proceeding, Advisory or Insolvency will

It is the responsibility of a legally appointed
or designated fiduciary to control, maintain, and distribute entrusted property
in a manner defined by law. Consistent with local workload management criteria,
monitor taxes that accrue during a proceeding to ensure that timely claims
are filed. The following types of liabilities may accrue during the administration
of a proceeding.

When Advisory or Insolvency learns that a fiduciary
is appointed by the court to operate a decedent/insolvent business or to oversee
the administration of an estate, send a letter to the fiduciary advising of
the responsibility for filing and paying federal taxes.

Fiduciary trust fund accounts monitored by Advisory
or Insolvency are excepted from the FTD Alert program. To monitor a decedent
case for trust fund compliance, input Transaction Code (TC) 136 to suppress
Federal Tax Deposit (FTD) Alert issuance. When the case is closed, or the
fiduciary is dismissed, input TC 137.

A fiduciary is a person entrusted with the property
of another. It is the responsibility of a legally appointed or designated
fiduciary to control, maintain, and distribute that property in a manner defined
by law. A fiduciary who fails to pay Service claims may be held personally
liable under 31 U.S.C. § 3713.

Advise the fiduciary, as soon as possible, of
the potential personal liability either by service of Form 4490 Proof of Claim
for Internal Revenue Taxes or Form 10492, Notice of Federal Taxes Due.

If estate assets are distributed without proper
payment of Service claims, refer the case to Counsel when the liability meets
Law Enforcement Manual (LEM) 5.5 guidelines.

The Statute of Limitations for suit against a
fiduciary under 31 U.S.C. § 3713 is normally ten years from the
date the tax was assessed.

See IRM 5.17.13.2 for a complete discussion of 31 U.S.C. § 3713
as it applies to an insolvent person.