Debt Discharge Allocation Issues in Flow-Through Entities

Many taxpayers have realized cancellation of indebtedness (COD) income during the current recession. Section 61 defines gross income to include income from cancellation of indebtedness Section 108 generally offers six provisions that could result in an exclusion of COD income: 1. The taxpayer is ins...

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Bibliographic Details
Published inExecutive's Tax & Management Report Vol. 73; no. 1; p. 6
Main Author Hamill, James R
Format Trade Publication Article
LanguageEnglish
Published Riverwoods CCH INCORPORATED 01.01.2010
Subjects
C corporations
Capital losses
Debt cancellation
Deferred income
Insolvency
Internal Revenue Code
Liability
Pass through entities
Passive activity
Section 108
Section 61
Stockholders
Tax allocation
Taxable income
Taxpayers
United States > US
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Summary:Many taxpayers have realized cancellation of indebtedness (COD) income during the current recession. Section 61 defines gross income to include income from cancellation of indebtedness Section 108 generally offers six provisions that could result in an exclusion of COD income: 1. The taxpayer is insolvent. 2. The discharge takes place in a court approved title 11 bankruptcy. 3. The debt is "qualified farm debt." 4. The debt is "qualified real property debt." 5. The debt is owed to the seller of property and is reduced in a purchase price reduction. 6. The debt is "qualified principal residence debt," and the discharge occurs after 2006 and before 2013.
ISSN:1098-1594