NH&RA Fall Developers Forum October 18-19, 2010 A Few Things to Remember About Debt Restructuring

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "NH&RA Fall Developers Forum October 18-19, 2010 A Few Things to Remember About Debt Restructuring"

Transcription

1 NH&RA Fall Developers Forum October 18-19, 2010 A Few Things to Remember About Debt Restructuring Forrest Milder, Nixon Peabody LLP Roger Yorkshaitis, Gatehouse Group, Inc.,

2 Overview -- 1 The cancellation of a partnership debt is generally treated as taxable cancellation of indebtedness income under IRC section 61(a)(12). Renegotiation of a debt instrument can have the same result. Cancellation of indebtedness income may not be taxable due to an exception (typically under IRC section 108), or it may be considered a taxable gain from the sale/exchange of property under IRC section 61(a)(3). 2

3 Overview -- 2 Section 108(e)(2) -- If payment of the debt would have given the taxpayer a deduction, then the taxpayer does not realize COD income. E.g., when a cash basis taxpayer's obligation to pay an expense is cancelled. The taxability of COD income is determined at the partner level. Each partner's distributive share of COD income and sale or exchange gain is separately stated on his or her Schedule K-1. 3

4 Sale of Property Subject to Nonrecourse Debt COD income is not realized when property that secures non-recourse debt is sold, foreclosed on, conveyed by deed-in-lieu of foreclosure or abandoned. Instead, the property is considered sold for the amount of the non-recourse obligation. See Tufts v. Commissioner, 461 U.S. 300 and section 7701(g)). In general, it does not matter that the real fair market value of the property is equal to or less than the amount of the debt. But see qualified real property business indebtedness, below. 4

5 Section 108(e)(10) If a debtor issues a new debt instrument in satisfaction of indebtedness, the debtor is treated as satisfying the indebtedness with an amount of money equal to the issue price of the new debt instrument. Sometimes, when an existing debt is simply modified, the revisions are considered to be enough of a change that the debtor is taxed as if it has issued a new debt in satisfaction of the old one. Typically, tax advisors review the regulations under section 1001 to see if the change is sufficient to require testing. 5

6 Modifications under Regulations -- 1 These can result in a new debt issuance that must be tested to see if there is COD income -- Change from recourse to nonrecourse or vice versa Different obligor on a recourse debt Different asset securing a nonrecourse debt Change in payment expectations [continued] 6

7 Modifications under Regulations -- 2 More factors that can result in a new debt issuance and must be tested to see if there is COD income -- Change that is 25 basis points or 5% of original rate (up or down) Deferral that is more than 5 years of 50% of original term (if less) Cumulate modifications Some unilateral modifications, or pursuant to the terms of the debt don t count. 7

8 Illustrations -- 1 $5M debt pays 3% interest, all due in Lender agrees to accept payment with interest continuing to accrue until payment: In 2012 OKAY (under 5 years) In 2016 Must be tested (more than 5 years) In 2012 with 2.8% interest OKAY (less than 25 basis points) 8

9 Illustrations -- 2 Loan is due in 2012 Extension to 2016 is okay (under 5 years) However, a second extension to 2020 must be tested, even though each extension was under 5 years; together, they are over 5. Remember that interest must continue to accrue $5M debt is recourse and secured by Property X Debt becomes nonrecourse, but still is expected to be repaid OKAY Debt becomes nonrecourse, but is secured by additional collateral must be evaluated 9

10 Illustrations -- 3 Suppose a soft $5M loan pays 2% interest, with all principal and interest due in December, Today s AFR is 4%, and one modification is made -- the loan is extended by ten years. Assume that the loan continues to bear interest at 2%, with all principal and interest due in So, the borrower is getting a loan that requires it to pay $6,217,000 at 2020, but using a 4% AFR, that payment, ten years from now, is only worth $4,038,000 today. So, unless one of the exceptions applies, the borrower has $962,000 of COD income. 10

11 Illustrations -- 4 Suppose a soft $5M loan pays 7% interest, with all principal and interest due in December, Today s AFR is 4%, and two modifications are made -- the loan is extended by ten years, and it now bears interest at 4%, with all principal and interest due in Even though the interest rate has been reduced from 7% to 4%, there is no COD income, because the new loan is at AFR. 11

12 1274-5(b) Regulations If property is taken subject to debt in connection with a sale or exchange, and the terms are modified as part of the sale or exchange, and the modification is an exchange under section 1001, the modification is treated as a separate transaction taking place immediately before the sale or exchange and is attributed to the seller of the property. Only applies if seller knew or had reason to know about the modification. The seller and buyer may jointly elect to treat the transaction as one in which the buyer first assumed the original (unmodified) debt instrument and then subsequently modified the debt instrument. The buyer and seller make the election by jointly signing a statement and attaching it to their tax returns. 12

13 Assuming debt as part of a sale (c)(4) In connection with the sale or exchange of property, an assumption of debt is not taken into account unless the terms and conditions of such debt instrument are modified (or the nature of the transaction is changed). What does the phrase terms and conditions mean? Illustration: Property secures $5M debt bearing 3% interest, and buyer takes subject to this debt. Does the debt have to be revised to be AFR? No. Suppose the due date for the debt is extended by 3 years? By 6? Suppose lender forgives $500K (to make the debt $4.5M) 13

14 Qualified Real Property Business Indebtedness Section 108(a)(1)(D) allows an exclusion for discharges of qualified real property business indebtedness. After 1993, must be acquisition indebtedness Doesn t apply to C corporations The amount excluded cannot exceed the excess, if any, of the outstanding principal amount of the indebtedness immediately before the discharge over the net fair market value of the qualifying real property. Must reduce basis E.g., $5M debt on $3M of property; the maximum that can be excluded is $2M, and basis is reduced by $2M. 14

15 Illustration of QRPBI and Nonrecourse Debt Assume partnership owns a building subject to $1.5 million non-recourse debt, and lender agrees to accept $1 million in full satisfaction. Assume that the value of the building is $1.2M. Partnership realizes COD income of $300,000 ($1.5M of debt less $1.2M of property s FMV) that is eligible for the QRPBI exclusion. Partnership realizes taxable COD income of $200,000 ($500,000 Total Debt Canceled less $300,000 Excluded under the QRPBI exception. Note that had the property been foreclosed, then there would have been a $500K capital gain, and no QRPBI exception. 15

16 Acquisition of Debt by a Related Person Section of the regulations If a person related to the debtor acquires the debt at a bargain price, then the debtor still has cancellation of indebtedness Related is based on Sections 267, 707 (essentially, 50% related) and 414 ( common control, generally 80% of vote or value for corporations, and 80% of profits or capital interests for partnerships and LLCs; can be in a chain or the same people owing brother/sister entities) If parties become related up to 2 years later, the IRS must be notified. Presumption they are related where the relationship develops within 6 months. Debt retired within one year is not subject to these rules. 16

17 Reacquisition of debt instrument New rule under American Recovery and Reinvestment Act ( ARRA ) If borrower buys its own business indebtedness, it can recognize income over 5 years, starting in Also applies to related party acquisitions of debt Section 108(i) Only applies to debt acquired in 2009 or

18 Section 108(e)(5) Adjustment to purchase money debt of a solvent debtor is considered a purchase price adjustment What is purchase money debt? Only if provided by seller? (IRS thinks so - see audit manual) Only if incurred at time of acquisition? Might it apply to development fees? 18

19 Writing down unpaid development fees Would this affect basis computation? Is there cancellation of indebtedness? Suppose there s a GP guarantee? Should it be enforced? 19

20 Renegotiating Below Market Government Loans Section 7872 regulations define below market loans. Here are a few exceptions: Loans made available by the lender to the general public on the same terms and conditions and which are consistent with the lender's customary business practice; Loans subsidized by the Federal, State, or Municipal government (or any agency or instrumentality), and which are made available under a program of general application to the public; Loans made by a private foundation or other organization described in section 170(c), with the primary purpose of accomplishing one or more of the purposes described in section 170(c)(2)(B). 20

21 Rev. Rul So, what happens if an excepted loan is renegotiated? Can it still take advantage of these exceptions? Rev. Rul involves an existing $100 HUD loan; pursuant to the mark to market program, HUD lends borrower $35 with very soft repayment terms, and borrower uses the $35 to pay down a portion of the existing $100 loan. The $65 loan is at AFR; the $35 loan is below AFR. IRS rules that the $35 loan qualifies for the exception from Section 7872 as a government loan under a program of general application to the public 21

22 Don t forget the Big Picture Opinion If no one is seeking an opinion, can the parties be more aggressive? Don t forget the 6 month/2 year rules under Section 108 Will there be a new Syndication? will likely have to satisfy the new investor that it won t have COD income Do all adjustments to debt before the new investor arrives? 22

23 Contacts Forrest David Milder Nixon Peabody LLP 100 Summer Street Boston, MA Roger Yorkshaitis Gatehouse Group, Inc. 120 Forbes Boulevard Mansfield, MA

Mortgage Forgiveness Debt Relief Act. Cancellation of Debt (COD) Income. Recourse Loan 10/6/2014. Consequences of the expiration of the act

Mortgage Forgiveness Debt Relief Act. Cancellation of Debt (COD) Income. Recourse Loan 10/6/2014. Consequences of the expiration of the act Mortgage Forgiveness Debt Relief Act Consequences of the expiration of the act Cancellation of Debt (COD) Income When a loan is forgiven without being paid back, COD Income is created. That amount is included

More information

Real Estate Debt Workout Tax Issues & Coping Strategies

Real Estate Debt Workout Tax Issues & Coping Strategies Real Estate Debt Workout Tax Issues & Coping Strategies Charles R. Beaudrot Partner, Tax and Real Estate Capital Markets Practices 404.504.7753 cbeaudrot@mmmlaw.com Timothy S. Pollock Partner, Tax, Real

More information

REAL ESTATE DEBT OUTS ) AND FORECLOSURES: SELECTED TAX CONSEQUENCES

REAL ESTATE DEBT OUTS ) AND FORECLOSURES: SELECTED TAX CONSEQUENCES REAL ESTATE DEBT RESTRUCTURING ( WORK- OUTS ) AND FORECLOSURES: SELECTED TAX CONSEQUENCES Presented by Robert Falb Robert Honigman Arent Fox LLP Washington, DC New York, NY Los Angeles, CA October 15 and

More information

Taxpayers. What You Should Know. I Found My Voice At The IRS

Taxpayers. What You Should Know. I Found My Voice At The IRS Cancellation Advocating of Debt for Taxpayers What You Should Know I Found My Voice At The IRS National Taxpayer Advocate Podcast Current Law IRS Office of Chief Counsel Cancellation of Debt Section 61(a)(12)

More information

PENNSYLVANIA PERSONAL INCOME TAX GUIDE CANCELLATION OF DEBT FOR PENNSYLVANIA PERSONAL INCOME TAX PURPOSES

PENNSYLVANIA PERSONAL INCOME TAX GUIDE CANCELLATION OF DEBT FOR PENNSYLVANIA PERSONAL INCOME TAX PURPOSES CHAPTER 24: CANCELLATION OF DEBT FOR PENNSYLVANIA PERSONAL INCOME TAX PURPOSES TABLE OF CONTENTS I. OVERVIEW OF CANCELLATION OF DEBT FOR PENNSYLVANIA PERSONAL INCOME TAX PURPOSES... 7 A. In General...

More information

Copyright 2009-2010 LA First Tax & Financial Services. All Rights Reserved.

Copyright 2009-2010 LA First Tax & Financial Services. All Rights Reserved. Cancellation of Debt Important Terms Foreclosure/ Repossession Forms 1099- A or C Non-recourse Debt Recourse Debt Debt Discharge Income (DDI) Insolvency IRS Tax Provisions Tax Provisions Involved: Emergency

More information

What the Bank Giveth, the IRS May (Partially) Take Away An Introduction to the Tax Aspects of Workouts

What the Bank Giveth, the IRS May (Partially) Take Away An Introduction to the Tax Aspects of Workouts What the Bank Giveth, the IRS May (Partially) Take Away An Introduction to the Tax Aspects of Workouts February 17, 2009 By: Gregory R. Wilson Many individual and business taxpayers are currently struggling

More information

Is Cancellation of Debt Income Taxable? One question that I am asked often these days is whether cancellation of debt (COD) income is taxable or not?

Is Cancellation of Debt Income Taxable? One question that I am asked often these days is whether cancellation of debt (COD) income is taxable or not? Is Cancellation of Debt Income Taxable? One question that I am asked often these days is whether cancellation of debt (COD) income is taxable or not? For tax purposes, the general rule is that all debt

More information

Treatment of COD Income by Partnerships

Treatment of COD Income by Partnerships Treatment of COD Income by Partnerships Stafford Presentation January 28, 2015 Polsinelli PC. In California, Polsinelli LLP Allocation of COD Income COD income is allocated to those partners who are partners

More information

TAX CONSEQUENCES OF MORTGAGE MODIFICATIONS

TAX CONSEQUENCES OF MORTGAGE MODIFICATIONS TAX CONSEQUENCES OF MORTGAGE MODIFICATIONS 1 Presenters: Jeff Gentes, Connecticut Fair Housing Center Elizabeth Maresca, Fordham Law School Diane E. Thompson, NCLC CANCELLATION OF DEBT - GENERAL RULES

More information

Cancellation of Debt

Cancellation of Debt Cancellation of Debt ROBERT E. MCKENZIE Arnstein & Lehr LLP Arnstein & Lehr LLP 1 Debt Cancellation If a debt is canceled or forgiven, other than as a gift or bequest, the debtor generally must include

More information

Real Estate Accounting Potpourri. Presented by: Jason Thompson Kimberly Brown and Stephanie Onzay

Real Estate Accounting Potpourri. Presented by: Jason Thompson Kimberly Brown and Stephanie Onzay Real Estate Accounting Potpourri Presented by: Jason Thompson Kimberly Brown and Stephanie Onzay Tax Consequences of Debt Discharge & Foreclosure Rules Outline Tax consequences of forgiven debt if: Insolvent

More information

Common Foreclosure and Cancellation of Debt Issues for Real Property (edited transcript)

Common Foreclosure and Cancellation of Debt Issues for Real Property (edited transcript) Common Foreclosure and Cancellation of Debt Issues for Real Property (edited transcript) Yvonne McDuffie-Williams: Thank you. As he said, my name is Yvonne McDuffie-Williams. I am a senior program analyst

More information

WORKING OUT AND RESTRUCTURING DISTRESSED DEBT TAX TRAPS AND TECHNIQUES TO ACHIEVE FAVORABLE OUTCOMES

WORKING OUT AND RESTRUCTURING DISTRESSED DEBT TAX TRAPS AND TECHNIQUES TO ACHIEVE FAVORABLE OUTCOMES WORKING OUT AND RESTRUCTURING DISTRESSED DEBT TAX TRAPS AND TECHNIQUES TO ACHIEVE FAVORABLE OUTCOMES State Bar of Wisconsin Annual Convention May 6, 2009 Richard A. Latta Michael Best & Friedrich LLP One

More information

The mechanics of foreclosure are specific to the laws of the State in

The mechanics of foreclosure are specific to the laws of the State in Unraveling the Mystery of Cancellation of Indebtedness Income What Borrowers Need to Know of the Potential Tax Costs of Loan Workouts and Foreclosures by Edward J. Hannon, Partner, Corporate and Real Estate

More information

Transcript for Canceled Debt (Tax Consequences)

Transcript for Canceled Debt (Tax Consequences) Transcript for Canceled Debt (Tax Consequences) Hello. I m Jean Wetzler, with a reenactment of a March 2009 IRS National Phone Forum on the Tax Consequences of Canceled Debt. The presenter for the phone

More information

DISCHARGE OF INDEBTEDNESS INCOME PLANNING OPPORTUNITIES

DISCHARGE OF INDEBTEDNESS INCOME PLANNING OPPORTUNITIES DISCHARGE OF INDEBTEDNESS INCOME PLANNING OPPORTUNITIES Thomas Mammarella Gordon, Fournaris & Mammarella, P.A. 1925 Lovering Avenue Wilmington, DE 19806 Tel: (302) 652-2900 Fax: (302) 652-1142 tmammarella@gfmlaw.com

More information

The 1099- C, Insolvency, and the Cancellation of Debt: What you Need to Know

The 1099- C, Insolvency, and the Cancellation of Debt: What you Need to Know Moving Your Practice in the Right Direction TM The 1099- C, Insolvency, and the Cancellation of Debt: What you Need to Know A Practice Essentials Presentation 2010 OnePath Practice Management Advisors,

More information

Foreclosures, Like Kind Exchanges and LLC Restructurings Deferring the Gain that Arises from the Disposition of Distressed Property

Foreclosures, Like Kind Exchanges and LLC Restructurings Deferring the Gain that Arises from the Disposition of Distressed Property Foreclosures, Like Kind Exchanges and LLC Restructurings Deferring the Gain that Arises from the Disposition of Distressed Property June, 2013 Presented by: Mary Cunningham, President, Chicago Deferred

More information

Tax Relief for Businesses in Distress American Bar Association Section of Taxation

Tax Relief for Businesses in Distress American Bar Association Section of Taxation Tax Relief for Businesses in Distress American Bar Association Section of Taxation 5-Year Carryback of 2008 and 2009 Net Operating Losses (NOLs) for Eligible Small Businesses (ESBs) For 2008 and 2009,

More information

Department of Legislative Services 2012 Session

Department of Legislative Services 2012 Session House Bill 640 Ways and Means Department of Legislative Services 2012 Session FISCAL AND POLICY NOTE Revised (Delegate Serafini, et al.) HB 640 Budget and Taxation Income Tax - Subtraction Modification

More information

Debt Modifications: Tax Planning Options Including New 10-Year Potential Deferral Ann Galligan Kelley, Providence College, USA

Debt Modifications: Tax Planning Options Including New 10-Year Potential Deferral Ann Galligan Kelley, Providence College, USA Debt Modifications: Tax Planning Options Including New 10-Year Potential Deferral Ann Galligan Kelley, Providence College, USA ABSTRACT With the recent decline in the real estate market, many taxpayers,

More information

Federal Income Taxation Chapter 7 Receipt Subject to Offsetting Liability

Federal Income Taxation Chapter 7 Receipt Subject to Offsetting Liability Presentation: Federal Income Taxation Chapter 7 Receipt Subject to Offsetting Liability Professors Wells September 21, 2015 Transactions with Borrowed Funds p.437 No income realized upon the receipt of

More information

Presented by: David L. Rice, Esq. For CalCPA Pasadena Discussion Group. (c) David L. Rice

Presented by: David L. Rice, Esq. For CalCPA Pasadena Discussion Group. (c) David L. Rice Presented by: David L. Rice, Esq. For CalCPA Pasadena Discussion Group 1 Mortgage defaults and foreclosures are of a national concern. In 2011, nearly 5,000,000 borrowers are behind on their mortgage.

More information

Tax Talk For Tough Times: A Primer On Cancellation Of Debt And Related Partnership Matters

Tax Talk For Tough Times: A Primer On Cancellation Of Debt And Related Partnership Matters Tax Talk For Tough Times: A Primer On Cancellation Of Debt And Related Partnership Matters Walter R. Rogers, Jr. Tough times often result in canceled debt and unexpected income. Walter R. Rogers, Jr.,

More information

Department of Legislative Services 2012 Session

Department of Legislative Services 2012 Session House Bill 600 Ways and Means Department of Legislative Services 2012 Session FISCAL AND POLICY NOTE Revised (Delegate Zucker, et al.) HB 600 Budget and Taxation Income Tax - Subtraction Modification -

More information

What does it mean for real property to be secured by or encumbered by debt?

What does it mean for real property to be secured by or encumbered by debt? What does it mean for real property to be secured by or encumbered by debt? Todd Golub Beverly Katz David A. Miller Baker & McKenzie LLP Internal Revenue Service Ernst & Young LLP Chicago, Illinois Washington,

More information

Department of Legislative Services 2014 Session

Department of Legislative Services 2014 Session Senate Bill 596 Budget and Taxation Department of Legislative Services 2014 Session FISCAL AND POLICY NOTE Revised (Senator Peters, et al.) SB 596 Ways and Means Income Tax Subtraction Modification - Mortgage

More information

Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)

Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Form 982 (Rev. July 2013) Department of the Treasury Internal Revenue Service Name shown on return Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) OMB No.

More information

Department of Legislative Services 2014 Session

Department of Legislative Services 2014 Session Department of Legislative Services 2014 Session HB 264 House Bill 264 Ways and Means FISCAL AND POLICY NOTE (Delegate Luedtke) Budget and Taxation Income Tax - Subtraction Modification - Student Loan Debt

More information

This publication is distributed with the understanding that the authors and publisher are not engaged in rendering legal, accounting or other

This publication is distributed with the understanding that the authors and publisher are not engaged in rendering legal, accounting or other This publication is distributed with the understanding that the authors and publisher are not engaged in rendering legal, accounting or other professional advice and assume no liability in connection with

More information

Tax Issues In Acquiring Debt

Tax Issues In Acquiring Debt Tax Issues In Acquiring Debt Charles R. Beaudrot Partner, Tax and Real Estate Capital Markets Practices 404.504.7753 cbeaudrot@mmmlaw.com Timothy S. Pollock Partner, Tax, Real Estate and Real Estate Capital

More information

Page 1 of 9 Home > Legal > Tax Folder > Taxation of Foreclosures and Short Sales Taxation of Foreclosures and Short Sales find the article at: "http://www.car.org/legal/taxfolder/taxation-foreclosures-shortsales/"

More information

Investors in U.S. real estate markets are currently experiencing unprecedented. Tax Issues for U.S. Real Estate Investors in Distressed Markets

Investors in U.S. real estate markets are currently experiencing unprecedented. Tax Issues for U.S. Real Estate Investors in Distressed Markets Tax Issues for U.S. Real Estate Investors in Distressed Markets Peter J. Elias The author discusses the significant, complex, and often very surprising or counterintuitive tax consequences associated with

More information

Common Tax Issues in a Down Economy, IRS Red Flags & Transactions in Property

Common Tax Issues in a Down Economy, IRS Red Flags & Transactions in Property Common Tax Issues in a Down Economy, IRS Red Flags & Transactions in Property Pedram Ben-Cohen Attorney & CPA BEN-COHEN LAW FIRM 1801 Avenue of the Stars, Suite 1025 Los Angeles, CA 90067-5809 Direct Dial:

More information

Selected Debt Restructuring Issues. Friday, January 22, 2010 Tax Law Section

Selected Debt Restructuring Issues. Friday, January 22, 2010 Tax Law Section Selected Debt Restructuring Issues Friday, January 22, 2010 Tax Law Section Robert E. August, Esq. Merline & Meacham, PA P.O. Box 10796 Greenville, SC 29603 p. (864) 242-4080 f. (864) 242-5758 baugust@merlineandmeacham.com

More information

Real Property: Cancellation of Debt and Foreclosure

Real Property: Cancellation of Debt and Foreclosure Real Property: Cancellation of Debt and Foreclosure Kim Lawson Senior tax analyst Small Business/Self-Employed Division May 16, 2012 The information contained in this presentation is current as of the

More information

Leveraging New IRS Rules Eliminating 36-Month Testing Period for Cancellation of Debt Income

Leveraging New IRS Rules Eliminating 36-Month Testing Period for Cancellation of Debt Income Leveraging New IRS Rules Eliminating 36-Month Testing Period for Cancellation of Debt Income MONDAY, DECEMBER 15, 2014, 1:00-2:50 pm Eastern IMPORTANT INFORMATION This program is approved for 2 CPE credit

More information

Sect. 108 and Cancellation of Debt Income: Navigating IRS Rules

Sect. 108 and Cancellation of Debt Income: Navigating IRS Rules Sect. 108 and Cancellation of Debt Income: Navigating IRS Rules Wayne R. Strasbaugh Ballard Spahr LLP 1735 Market Street, 51st Floor Philadelphia, Pennsylvania 19103 strasbaugh@ballardspahr.com October

More information

DEALING WITH THE BANKRUPT PROPERTY OWNER BY HARRY CHARLES AUGUST 22, 2008 & AUGUST 28, 2008

DEALING WITH THE BANKRUPT PROPERTY OWNER BY HARRY CHARLES AUGUST 22, 2008 & AUGUST 28, 2008 DEALING WITH THE BANKRUPT PROPERTY OWNER BY HARRY CHARLES AUGUST 22, 2008 & AUGUST 28, 2008 FORECLOSURE: ISSUES, TRENDS AND PERSPECTIVES IN COMMERCIAL LAW MOBAR CLE 1. What is foreclosure for tax purposes?

More information

CHOICE OF ENTITY OUTLINE

CHOICE OF ENTITY OUTLINE CHOICE OF ENTITY OUTLINE by Belan K. Wagner This article is an outline of a lecture which we recently gave at a San Francisco tax conference. While to many of you the topic may seem old hat, we focused

More information

Continuing Professional Education

Continuing Professional Education Continuing Professional Education Course Number CPE20908 Revision Date: 11/15/2008 Debt Relief Income & Insolvent Taxpayer Exclusion Learning Objectives After completing this course, the student will be

More information

Troubled Commercial Real Estate Debt Restructure

Troubled Commercial Real Estate Debt Restructure Troubled Commercial Real Estate Debt Restructure 2010 Real Estate Conference June 17, 2010 Robert W. Reardon Partner, Real Estate and Commercial Lending Practices 404.504.7774 Charles R. Beaudrot, Jr.

More information

FORECLOSURE TAXATION

FORECLOSURE TAXATION FORECLOSURE TAXATION Phil Rosenkranz Attorney At Law Legal Aid Society of Milwaukee 521 North 8th Street Milwaukee, Wisconsin 53233 (414) 727-5300 (414) 291-5488 (fax) prosenkranz@lasmilwaukee.com Sean

More information

Section 83.--Property Transferred in Connection with Performance of Services

Section 83.--Property Transferred in Connection with Performance of Services Part I Section 83.--Property Transferred in Connection with Performance of Services 26 C.F.R. 1.83-4: Special rules. (Also 108, 3121, 3306, 3401, 1.1001-3) Rev. Rul. 2004-37 ISSUE If an employee issued

More information

RESTRUCTURING DEBT ON DISTRESSED REAL ESTATE

RESTRUCTURING DEBT ON DISTRESSED REAL ESTATE RESTRUCTURING DEBT ON DISTRESSED REAL ESTATE A. Alteration of Mortgage Debt 1. Cancellation or Reduction of Principal Amount of Mortgage Debt - Impact on Mortgagor a. General rule b. No Foreclosure c.

More information

Tax Issues for Bankruptcy & Insolvency

Tax Issues for Bankruptcy & Insolvency Tax Issues for Bankruptcy & Insolvency By David S. De Jong, Esquire, CPA Stein, Sperling, Bennett, De Jong, Driscoll & Greenfeig, PC 25 West Middle Lane Rockville, Maryland 20850 301-838-3204 ddejong@steinsperling.com

More information

REAL ESTATE PROPERTY FORECLOSURE and CANCELLATION OF DEBT AUDIT TECHNIQUE GUIDE

REAL ESTATE PROPERTY FORECLOSURE and CANCELLATION OF DEBT AUDIT TECHNIQUE GUIDE REAL ESTATE PROPERTY FORECLOSURE and CANCELLATION OF DEBT AUDIT TECHNIQUE GUIDE NOTE: This document is not an official pronouncement of the law or the position of the Service and cannot be used, cited,

More information

CANCELLATION OF DEBT(COD) Applicable Entities COD. Informational Return. Identifiable Event. IRC Sec. 6050P:

CANCELLATION OF DEBT(COD) Applicable Entities COD. Informational Return. Identifiable Event. IRC Sec. 6050P: Tax Consequences of Foreclosure Philip J. Rosenkranz Staff Attorney Tax Consequences in Foreclosure Two distinct taxable Events: 1.Cancellation of debt 2. Gain or loss The Legal Aid Society of Milwaukee,

More information

Income Tax Consequences of Debt Modification

Income Tax Consequences of Debt Modification Bankruptcy Insights Income Tax Consequences of Debt Modification Kevin M. Zanni and Robert F. Reilly, CPA Debt restructurings are common among financially troubled debtor corporations. And, debt restructurings

More information

According to First American CoreLogic, almost $165

According to First American CoreLogic, almost $165 ALERT TAX News Concerning Recent Tax Issues AUGUST 6, 2009 BORROWERS AND LENDERS COMING TO GRIPS WITH THE PITFALLS AND OPPORTUNITIES WHEN MODIFYING THE TERMS OF DISTRESSED DEBT Thomas J. Gallagher 215.665.4656

More information

Attention: See IRS Publications 1141, 1167, 1179 and other IRS resources for information about printing these tax forms.

Attention: See IRS Publications 1141, 1167, 1179 and other IRS resources for information about printing these tax forms. Attention: This form is provided for informational purposes only. Copy A appears in red, similar to the official IRS form. Do not file copy A downloaded from this website. The official printed version

More information

WHY THE EXPIRATION OF THE MORTGAGE DEBT FORGIVENESS ACT RARELY APPLIES TO ARIZONA SHORT SALES 1

WHY THE EXPIRATION OF THE MORTGAGE DEBT FORGIVENESS ACT RARELY APPLIES TO ARIZONA SHORT SALES 1 WHY THE EXPIRATION OF THE MORTGAGE DEBT FORGIVENESS ACT RARELY APPLIES TO ARIZONA SHORT SALES 1 After years of extensions to the Mortgage Debt Forgiveness Relief Act, this act will expire at the end of

More information

Part 1 Cancellation of Debt Principal Residence. Slide 2 Objectives At the end of this lesson, using the resource materials, you will be able to:

Part 1 Cancellation of Debt Principal Residence. Slide 2 Objectives At the end of this lesson, using the resource materials, you will be able to: Slide 1 Welcome! The Cancellation of Debt lesson is optional specialty training available only on Link & Learn Taxes for volunteers with an Advanced, Military, or International Certification. A separate

More information

Illinois Institute for Continuing Legal Education. Limited Liability Companies vs. S Corporations. Essential Tax Issues

Illinois Institute for Continuing Legal Education. Limited Liability Companies vs. S Corporations. Essential Tax Issues Illinois Institute for Continuing Legal Education Limited Liability Companies vs. S Corporations Essential Tax Issues By James A. Nepple Nepple Law, PLC 1515 Fourth Avenue, Suite 300 Rock Island, Illinois

More information

Kuno S. Bell on How Best to Sell Your Ownership in a Rental Real Estate Partnership

Kuno S. Bell on How Best to Sell Your Ownership in a Rental Real Estate Partnership Kuno S. Bell on How Best to Sell Your Ownership in a Rental Real Estate Partnership By Kuno S. Bell, Pease & Associates, Inc. 3.01 Introduction The statement that you own real estate through a partnership

More information

Canceled Debts, Foreclosures, Repossessions, and Abandonments

Canceled Debts, Foreclosures, Repossessions, and Abandonments Department of the Treasury Internal Revenue Service Publication 4681 Cat. No. 51508F Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals) For use in preparing 2013 Returns Contents

More information

M&A Insights Purchasing and modifying discount debt What dealmakers should know

M&A Insights Purchasing and modifying discount debt What dealmakers should know M&A Insights March 2013 Merger & Acquisition Services M&A Insights Purchasing and modifying discount debt What dealmakers should know Introduction In the current economy, a significant amount of outstanding

More information

Apple Federal Credit Union. Reporting Delinquent Matters and 1099-A and 1099-C Presentation 2014

Apple Federal Credit Union. Reporting Delinquent Matters and 1099-A and 1099-C Presentation 2014 Apple Federal Credit Union Reporting Delinquent Matters and 1099-A and 1099-C Presentation 2014 Discussion Topics Reporting Delinquent Matters 1099 Overview 1099-A 1009-C IRS Position on 1099-C Bankruptcy

More information

ANALYSIS OF AMENDED BILL

ANALYSIS OF AMENDED BILL Franchise Tax Board ANALYSIS OF AMENDED BILL Author: Perea Analyst: Scott McFarlane Bill Number: AB 99 Related Bills: See Legislative History Telephone: 845-6075 Introduced Date: Amended Date: Attorney:

More information

FLORIDA BAR TAX SECTION MEETING

FLORIDA BAR TAX SECTION MEETING FLORIDA BAR TAX SECTION MEETING Recent Developments Concerning Partnership Tax Including Leveraged Partnerships, COD Income and Tax Credits - October 13, 2012 James Barrett, Esq., Baker & McKenzie LLP

More information

SPECIAL ALERT: MORTGAGE FORGIVENESS DEBT RELIEF ACT OF 2007 BRINGS TAX CHANGES TO REAL ESTATE

SPECIAL ALERT: MORTGAGE FORGIVENESS DEBT RELIEF ACT OF 2007 BRINGS TAX CHANGES TO REAL ESTATE SPECIAL ALERT: MORTGAGE FORGIVENESS DEBT RELIEF ACT OF 2007 BRINGS TAX CHANGES TO REAL ESTATE By Patricia Hughes Mills, J.D., L.L.M. Associate Professor of Clinical Accounting University of Southern California

More information

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION Philip Ting, Chair. AB 99 (Perea) As Amended February 18, 2015 SUSPENSE

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION Philip Ting, Chair. AB 99 (Perea) As Amended February 18, 2015 SUSPENSE Page 1 Date of Hearing: May 18, 2015 ASSEMBLY COMMITTEE ON REVENUE AND TAXATION Philip Ting, Chair 2/3 vote. Urgency. Fiscal committee. AB 99 (Perea) As Amended February 18, 2015 SUSPENSE SUBJECT: Personal

More information

Attention: See IRS Publications 1141, 1167, 1179 and other IRS resources for information about printing these tax forms.

Attention: See IRS Publications 1141, 1167, 1179 and other IRS resources for information about printing these tax forms. Attention: This form is provided for informational purposes only. Copy A appears in red, similar to the official IRS form. Do not file copy A downloaded from this website. The official printed version

More information

Income Tax Planning for Commercial Real Estate Debt Restructuring

Income Tax Planning for Commercial Real Estate Debt Restructuring Bankruptcy Planning Insights Income Tax Planning for Commercial Real Estate Debt Restructuring Robert F. Reilly, CPA Many industry observers forecast a continued downturn in the commercial real estate

More information

Taxation Meets Bizarro World: Passthroughs and Debt Workouts

Taxation Meets Bizarro World: Passthroughs and Debt Workouts Taxation Meets Bizarro World: Passthroughs and Debt Workouts In most transactions, there is a normal way to proceed from both a tax and economic perspective. Accordingly, experience often teaches seasoned

More information

NH&RA Summer Institute and NMTC Symposium

NH&RA Summer Institute and NMTC Symposium NH&RA Summer Institute and NMTC Symposium The NMTC Exit Miriam Vock Sheehan: Nolan Sheehan Patten LLP Moderator Mark Einstein: Reznick Group Stephanie Barrett: Bank of America David Trevisani: National

More information

ANALYSIS OF ORIGINAL BILL

ANALYSIS OF ORIGINAL BILL Franchise Tax Board ANALYSIS OF ORIGINAL BILL Author: Harkey Analyst: Scott McFarlane Bill Number: AB 2358 Related Bills: See Legislative History Telephone: 845-6075 Introduced Date: February 21, 2014

More information

Simplify the Tax Treatment of Cancellation of Debt Income

Simplify the Tax Treatment of Cancellation of Debt Income Appendices Most Serious Simplify the Tax Treatment of Cancellation of Debt Income LR # 6 LR #6 Simplify the Tax Treatment of Cancellation of Debt Income Problem At a time when the government is taking

More information

Insolvency Procedures under Section 108

Insolvency Procedures under Section 108 Income Tax Insolvency Insights Insolvency Procedures under Section 108 Irina Borushko and Urmi Sampat In the current prolonged recession, many industrial and commercial entities have had to restructure

More information

The goal today is to accomplish three things:

The goal today is to accomplish three things: MARK SHERMAN, CPA The goal today is to accomplish three things: 1. Educate you on The Mortgage Forgiveness Debt Relief Act of 2007. 2. Show you how to save taxes on your real estate business. 3. Help you

More information

10.0 AT-RISK LIMITATIONS

10.0 AT-RISK LIMITATIONS Page 1 of 21 Table of Contents 10.0 AT-RISK LIMITATIONS 10.1 General Overview IRC 465, R&TC 17551, and R&TC 24691 10.2 Amount At-Risk 10.3 Contributions of Cash or Other Property 10.4 Contributions of

More information

no--asset 7 s asset 7 s

no--asset 7 s asset 7 s Bankruptcy Questions Answered! Attorney to Non- Attorney Robert McKenzie, EA, Esq. Types of Bankruptcies This is not an easy subject, but our goal is to distill it to key issues you need to know as a return

More information

Mortgage Forgiveness Debt Relief Act of 2007 Reduces Negative Tax Consequences from Foreclosures

Mortgage Forgiveness Debt Relief Act of 2007 Reduces Negative Tax Consequences from Foreclosures Mortgage Forgiveness Debt Relief Act of 2007 Reduces Negative Tax Consequences from Foreclosures APRIL 2008 - During the recent U.S. real estate boom, some lending institutions abandoned all caution. Lending

More information

DEBT FORGIVENESS AND MODIFICATION: A Primer for the Non-tax Attorney. Wayne R. Johnson, Esq. 1

DEBT FORGIVENESS AND MODIFICATION: A Primer for the Non-tax Attorney. Wayne R. Johnson, Esq. 1 DEBT FORGIVENESS AND MODIFICATION: A Primer for the Non-tax Attorney by Wayne R. Johnson, Esq. 1 The last two years have been trying to say the least. The dot-com implosion and the events of September

More information

Advanced Markets Combining Estate Planning Techniques A Powerful Strategy

Advanced Markets Combining Estate Planning Techniques A Powerful Strategy Life insurance can help meet many wealth transfer goals. The death benefit could cover estate taxes, for instance, avoiding liquidation of much of the estate to meet the estate tax bill. Even though a

More information

A REVIEW OF SOME TAX ISSUES THAT YOU MIGHT SEE FROM TIME TO TIME

A REVIEW OF SOME TAX ISSUES THAT YOU MIGHT SEE FROM TIME TO TIME A REVIEW OF SOME TAX ISSUES THAT YOU MIGHT SEE FROM TIME TO TIME GREENSBORO BAR ASSOCIATION February 16, 2012 By: Keith A. Wood, Attorney, CPA Carruthers & Roth, P.A. 235 North Edgeworth Street Post Office

More information

What is an ESOP? ESOPs are defined contribution pension plans that invest primarily in the stock of the plan sponsor

What is an ESOP? ESOPs are defined contribution pension plans that invest primarily in the stock of the plan sponsor Employee Stock Ownership Plans May 2013 http://aicpa.org/ebpaqc ebpaqc@aicpa.org Topix Primer Series The AICPA Employee Benefit Plan Audit Quality Center (EBPAQC) has developed this primer to provide Center

More information

Foreclosures, Repossessions, and Cancelled Debt

Foreclosures, Repossessions, and Cancelled Debt CPE/CE 4 Credit Hours Foreclosures, Repossessions, and Cancelled Debt Help Clients Get Back on Their Feet 2014 Tax Year Interactive Self-Study CPE/CE Course Foreclosures, Repossessions, and Cancelled Debt

More information

Sect. 108 and Cancellation of Debt Income: Navigating IRS Rules Deferring Tax Under This Complex Code Section and Under Latest Guidance

Sect. 108 and Cancellation of Debt Income: Navigating IRS Rules Deferring Tax Under This Complex Code Section and Under Latest Guidance Presenting a live 110 minute teleconference with interactive Q&A Sect. 108 and Cancellation of Debt Income: Navigating IRS Rules Deferring Tax Under This Complex Code Section and Under Latest Guidance

More information

S Corporation Partnership Basis. Vicki H. Meyer CPA Thomas Howell Ferguson, PA vmeyer@thf-cpa.com 850-668-8100

S Corporation Partnership Basis. Vicki H. Meyer CPA Thomas Howell Ferguson, PA vmeyer@thf-cpa.com 850-668-8100 S Corporation Partnership Basis Vicki H. Meyer CPA Thomas Howell Ferguson, PA vmeyer@thf-cpa.com 850-668-8100 WHY FIRM RISK MECHANICS STRATEGIES What Basis Does Limits the amount of loss that can be deducted.

More information

26 CFR 1.121-1: Exclusion of gain from sale or exchange of a principal residence. (Also: 61, 165, 691, 1001; 1.61-6, 1.165-1, 1.691(a)-1, 1.1001-1.

26 CFR 1.121-1: Exclusion of gain from sale or exchange of a principal residence. (Also: 61, 165, 691, 1001; 1.61-6, 1.165-1, 1.691(a)-1, 1.1001-1. Section 121. Exclusion of gain from sale of principal residence 26 CFR 1.121-1: Exclusion of gain from sale or exchange of a principal residence. (Also: 61, 165, 691, 1001; 1.61-6, 1.165-1, 1.691(a)-1,

More information

Building Your Tax Knowledge

Building Your Tax Knowledge Building Your Tax Knowledge Foreclosures & Debt Relief The 1099-A and C November, 2012 William Roos, EA Table of Contents Foreclosures and Cancellation of Debt... 1 Introduction... 1 Types of Debt... 2

More information

Re: Revenue Ruling 99-6 Related to the Conversion of Partnerships to Disregarded Entities

Re: Revenue Ruling 99-6 Related to the Conversion of Partnerships to Disregarded Entities October 1, 2013 Mr. Daniel Werfel Acting Commissioner Internal Revenue Service 1111 Constitution Avenue, Room 3000 Washington, DC 20024 Re: Revenue Ruling 99-6 Related to the Conversion of Partnerships

More information

Foreclosures, Repossessions, and Cancelled Debt

Foreclosures, Repossessions, and Cancelled Debt CPE/CE 4 Credit Hours Foreclosures, Repossessions, and Cancelled Debt Help Clients Get Back on Their Feet Interactive Self-Study CPE/CE Course Foreclosures, Repossessions, and Cancelled Debt Self-Study

More information

Navigating the Recession:

Navigating the Recession: Navigating the Recession: What Companies Need to Consider Today Finance: Issues for Corporate Borrowers in the Current Credit Markets March 2009 John Lawlor, Partner in Finance/Leveraged Finance David

More information

Pass-Through Entities and COD Income:

Pass-Through Entities and COD Income: Presenting a live 110-minute webinar with interactive Q&A Pass-Through Entities and COD Income: Sheltering Solvent Entity Owners From Insolvent Entity Taxable COD Income WEDNESDAY, JANUARY 28, 2015 1pm

More information

Non-Performing Loans

Non-Performing Loans Non-Performing Loans Non-Performing Loans Accounting Treatment Legal Factors Tax Treatment Audit Process NPL Accounting Types of Loans Subject to Nonaccrual Accounting Commercial Loans Consumer Real Estate

More information

What is a Short Sale?

What is a Short Sale? What is a Short Sale? A Short Sale is used to describe the sale of a home in which the homeowner owes the bank more than the home is worth. The bank agrees to allow the home to be sold for less than what

More information

Financing Incentives March 5, 2009

Financing Incentives March 5, 2009 Change picture on Slide Master Financing Incentives March 5, 2009 PRESENTED BY Robert A. Friedman Troutman Sanders LLP The Chrysler Building 405 Lexington Ave New York, NY 10174 (212) 704-6000 www.troutmansanders.com

More information

The Hidden Tax Trap Associated with Cancellation of Debt

The Hidden Tax Trap Associated with Cancellation of Debt The Hidden Tax Trap Associated with Cancellation of Debt Justin Pierce Berutich and Richard A. Morgan * In this article, the authors discuss the e ects of cancellation of debt income resulting from loan

More information

Cancelled Debt Remains Issue for Homeowners

Cancelled Debt Remains Issue for Homeowners Cancelled Debt Remains Issue for Homeowners Let s Talk Tax By Brett Hersh, EA, MBA The housing crisis may have dropped from the headlines in recent months. Unfortunately, however, the crisis remains a

More information

5 REASONS TO RECONSIDER YOUR SDIRA IN 2014

5 REASONS TO RECONSIDER YOUR SDIRA IN 2014 5 REASONS TO RECONSIDER YOUR SDIRA IN 2014 BY, CLINT COONS, ESQ Self Directed IRA Soo Easy Fund your account Find the investment Request funds to purchase We do the rest You manage the investment SDIRA

More information

Foreclosures on the Rise

Foreclosures on the Rise That Pesky COD Karen Brosi, EA, CFP Foreclosures 2 1 Foreclosures on the Rise Top 4 states at Sep 30, 2009: Nevada Arizona California Florida 2.5 million properties p received default notice first 9 months

More information

IMPACT. November/December 2011. Watch out for tax bills delivered COD. Lending to or borrowing from your company the right way

IMPACT. November/December 2011. Watch out for tax bills delivered COD. Lending to or borrowing from your company the right way tax November/December 2011 IMPACT Tax treatment of debt forgiveness Watch out for tax bills delivered COD Lending to or borrowing from your company the right way Why jointly owned property may not be a

More information

4942 VITA/TCE 2013 Volunteer Income Tax Assistance (VITA) / Tax Counseling for the Elderly (TCE) www.irs.gov Internal Revenue Service

4942 VITA/TCE 2013 Volunteer Income Tax Assistance (VITA) / Tax Counseling for the Elderly (TCE) www.irs.gov Internal Revenue Service 4942 VITA/TCE Specialty Courses Cancellation of Debt (COD) and Health Savings Accounts (HSAs) Volunteer Income Tax Assistance (VITA) / Tax Counseling for the Elderly (TCE) 2013 TEST Take your VITA/TCE

More information

Attention: See IRS Publications 1141, 1167, 1179 and other IRS resources for information about printing these tax forms.

Attention: See IRS Publications 1141, 1167, 1179 and other IRS resources for information about printing these tax forms. Attention: This form is provided for informational purposes only. Copy A appears in red, similar to the official IRS form. Do not file copy A with the IRS. The official printed version of this IRS form

More information

IMPACT. November/December 2011. Watch out for tax bills delivered COD. Lending to or borrowing from your company the right way

IMPACT. November/December 2011. Watch out for tax bills delivered COD. Lending to or borrowing from your company the right way tax November/December 2011 IMPACT Tax treatment of debt forgiveness Watch out for tax bills delivered COD Lending to or borrowing from your company the right way Why jointly owned property may not be a

More information

CANCELLATION OF DEBT by. ROBERT E. McKENZIE,, ATTORNEY

CANCELLATION OF DEBT by. ROBERT E. McKENZIE,, ATTORNEY CANCELLATION OF DEBT by ROBERT E. McKENZIE,, ATTORNEY ARNSTEIN & LEHR LLP SUITE 1200 120 SOUTH RIVERSIDE PLAZA Chicago, Illinois 60606 (312) 876-7100 REMCKENZIE@ARNSTEIN.COM http://www.mckenzielaw.com/

More information

General Rules 1. All income is taxable.

General Rules 1. All income is taxable. Chapter 17 Pages 239-252 General Rules 1. All income is taxable. p. 239 2. Cancelled debt is income. 3. Cancelled debt is taxable: a. To a solvent taxpayer. b. To the extent solvency is restored. Warning!

More information