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

Category Archives: Bankruptcy

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IRS Will Not Follow Partner COD Bankruptcy Exception Cases

Posted in Bankruptcy, Cancellation of Debt Income, Partnership/LLC

In a new Action on Decision (AOD 2015-10), the IRS stated that it will not follow the Tax Court’s 2004 Martinez decision, which had allowed a general partner to exclude cancellation of debt (COD) income from a partnership in bankruptcy.  Mr. Martinez was a general partner who guaranteed the partnership’s debt, and the bankruptcy court… Continue Reading

IRS Clarifies Partner Insolvency Computation for COD Exception

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

The IRS issued new Rev. Rul. 2012-14 on applying the Section 108 insolvency exclusion to Cancellation Of Debt (COD) income from a partnership. The IRS clarified that discharged partnership nonrecourse debt should be allocated among the partners based on the way the partners share the COD income.  Thus if a partner receives a disproportionate amount… Continue Reading

Regulations Address How to Apply COD Exceptions for Disregarded Entities

Posted in Bankruptcy

Proposed regulations address how to apply the bankruptcy and insolvency exceptions to Cancellation Of Debt (COD) income involving disregarded entities or grantor trusts. Specifically, the regulations look through the disregarded entities and require that the tax-regarded owner of the disregarded entity must be in bankruptcy or insolvent to qualify for the related COD exceptions. If… Continue Reading