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Tax Law Roundup current law developments in U.S. taxation

Category Archives: Workouts

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IRS Ruling Addresses LLC Eligibility for Cancellation of Debt Exception

Posted in Cancellation of Debt Income, Partnership/LLC, Real Estate, Workouts

In new CCA 201525010, the IRS addressed the issue of whether a general “exculpatory” debt of an LLC is recourse or non-recourse for purposes of classifying debt-relief as potential cancellation of debt (COD) income. Recourse treatment means the debt forgiveness creates COD income. Non-recourse means the debt relief is treated as proceeds from the sale… Continue Reading

Final Regulations Address Temporary Exception to Cancellation of Debt Income

Posted in Cancellation of Debt Income, General, Passthrough Entity, Workouts

During the recession Congress passed Section 108(i), allowing taxpayers to elect under Section 108(i) to defer Cancellation of Debt (COD) income from 2009 and 2010 so that the income is taxed 20% a year from 2014-2018.  Because of the short timing the IRS addressed taxpayers’ immediate questions through Rev. Proc. 2009-37 and two sets of… Continue Reading

Is It the End or Just the Beginning: Planning with the Final Partnership Debt-for-Equity Regulations

Posted in Partnership/LLC, Workouts

 For years taxpayers had argued that a “partnership debt-for-equity” exception to cancellation of debt (COD) income lurked in the far corners of the tax rules. That argument was abruptly taken off the table on October 22, 2004 when Congress added partnerships to the scope of § 108(e)(8), confirming that partnerships have COD income when using… Continue Reading

Final Regulations Address Partnership Debt-For-Equity Transactions

Posted in General, Joint Venture, Partnership/LLC, Workouts

Today the IRS issued final regulations under section 108(e)(8) to clarify the mechanics of loan workouts when a lender contributes its loan in exchange for equity in the borrower-partnership.  In 2004, Congress extended this historical corporate rule to partnerships, providing that the partnership is required to recognize cancelation of debt (COD) income to the extent… Continue Reading