Transcription of Insolvency Procedures under Section 108
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Insolvency Procedures under Section 108
INSIGHTS SPRING 2012 63 Insolvency Procedures under Section 108 Irina Borushko and Urmi SampatIncome Tax Insolvency InsightsIn the current prolonged recession, many industrial and commercial entities have had to restructure their outstanding debt. Many debtor entities have had to restructure their public bonds as well as their private mortgages and notes. In particular, many real estate-intensive debtor entities have had to restructure their commercial real estate mortgages. When any amount of debt repayment is forgiven in such a debt restructuring, that event causes the debtor entity to recognize cancellation of debt (COD) income for federal income tax purposes. However, the debtor taxpayer can exclude some, or all, of this COD income to the extent that the debtor entity is insolvent. This discussion summarizes the federal income tax requirements related to the debtor entity recognition of COD income.
www.willamette.com INSIGHTS • SPRING 2012 63 Insolvency Procedures under Section 108. Irina Borushko and Urmi Sampat. Income Tax Insolvency Insights
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