Real Estate Debt Workout Tax Issues & Coping Strategies
|
|
- Sophia Hodge
- 8 years ago
- Views:
Transcription
1 Real Estate Debt Workout Tax Issues & Coping Strategies Charles R. Beaudrot Partner, Tax and Real Estate Capital Markets Practices Timothy S. Pollock Partner, Tax, Real Estate and Real Estate Capital Markets Practices
2 INTRODUCTION Tax Issues Associated With Loan Workouts: Cancellation of Debt ( COD ) Income Debt Modifications Coping Strategies to Defer Recognition of the COD Income Purchasing Debt at a Discount 2
3 COD INCOME Debt Forgiveness: If satisfy $10M loan for $5M = $5M COD Income If Lender reduces $10M loan to $5M because that is what the property will support = $5M COD Income If the Borrower, or more typically, a person related to a Borrower*, buys the $10M note for $5M, and keeps the debt in place = $5M COD Income * Related Party determined under Sections 267 and 707 of the Code. Generally allows for up to 49.9% overlap in ownership with the Borrower. EXCEPTION: Purchase money debt reduction: Must be original Seller and original Buyer PROBLEM: COD Income is phantom income: COD Income is ordinary income 3
4 MODIFICATIONS TRIGGERING DEEMED EXCHANGES The Cottage Savings regulations trigger a deemed exchange on any significant modification. Regs
5 MODIFICATIONS TRIGGERING DEEMED EXCHANGES (CONT D.) - While a single modification may not be significant on its own, modifications are looked at collectively and in the aggregate. - There are 10 bright-line tests and safe harbors: 1. Change in yield. Regs (e)(2)(ii); - 25 basis points (.25%) or 5% of the annual yield is deemed significant. 5
6 MODIFICATIONS TRIGGERING DEEMED EXCHANGES (CONT D.) 2. Change in timing of payment. Regs (e)(3)(i); - Payment is deferred more than the lesser of five years or 50% of the original term of the Note. - Apparently extension options in the Note are not considered unless Borrower can unilaterally extend without conditions. 6
7 MODIFICATIONS TRIGGERING DEEMED EXCHANGES (CONT D.) 3. Change in Obligor. Regs (e)(4)(ii); (Note: Not a change for non-recourse obligation, but it is for a recourse obligation); 4. An addition or deletion of a Co-Obligor. Regs (e)(4)(iii); if it affects likelihood of repayment; 7
8 MODIFICATIONS TRIGGERING DEEMED EXCHANGES (CONT D.) 5. Change in security or credit enhancement. Regs (e)(4)(iv); - Generally significant in recourse debt only if changes likelihood of repayment. - Generally significant in case of a non-recourse loan. 6. Change in priority of debt. Regs (e)(4)(v); - Significant if changes likelihood of repayment. 8
9 MODIFICATIONS TRIGGERING DEEMED EXCHANGES (CONT D.) 7. Change from debt to equity. Regs (e)(5)(vi); 8. Change in recourse nature. Regs (e)(5)(vii)(A); - Change from recourse to non-recourse is significant. - Change from non-recourse to recourse is significant. 9
10 MODIFICATIONS TRIGGERING DEEMED EXCHANGES (CONT D.) 9. Change in customary financial covenants. Regs (e)(6); - Generally not significant. 10. Indirect tax exempt bond modifications. Regs (f)(6). 10
11 MODIFICATIONS TRIGGERING DEEMED EXCHANGES (CONT D.) CAREFUL: Two Most Common Modifications: Change in Yield and Deferral of Payments: EXAMPLE: Change in Yield: - Original Note Rate & Yield: 5.5% - Modified Yield: 5.0% Yield has deceased by 50 basis points; also yield has decreased by 9.09% (.5 5.5%). Conclusion is the modification was significant. 11
12 MODIFICATIONS TRIGGERING DEEMED EXCHANGES (CONT D.) EXAMPLE: Modification: Conclusion: Change in Timing Original Term: Remaining Term: 5 Years 2 Years Maturity extended 2 years and next six months of payments deferred to maturity. While extension of maturity by 2 years does not exceed 50% of the original 5 year term, deferring the next six months payments to maturity is more than a 3 year deferral (2 year remaining term plus 2 year extension) which is more than 50% of original term. Therefore, modification is significant. 12
13 MODIFICATIONS TRIGGERING DEEMED EXCHANGES (CONT D.) OTHER: Adding guaranty or additional collateral to non-recourse debt is generally significant. 13
14 GOOD NEWS: MODIFICATIONS TRIGGERING DEEMED EXCHANGES (CONT D.) COD income is only triggered if the principal balance of the "new" debt is less than the principal balance of "old" debt. Test is at the applicable federal rates. With low current applicable federal rates in the 3% range, this rarely happens. 14
15 Giving Up The Property TRANSFER OF PROPERTY TO THE LENDER Foreclosure and Voluntary Deed in Lieu Transfers Are Sales Tax Analysis Depends on Whether Loan was Recourse or Non-Recourse Liability 15
16 TRANSFER OF PROPERTY TO THE LENDER (CONT D.) (i) Non-Recourse Debt: Sale for the Debt Debt Minus Basis = Gain or Loss 1. Debt $1,000,000 $1,000,000 Basis 700,000 1,200,000 Gain(Loss) $ 300,000 $ ( 200,000) 16
17 TRANSFER OF PROPERTY TO THE LENDER (CONT D.) (ii) Recourse Debt: Part Sale and Part CODI FMV of Property (Up to Debt) Equals Sales Price Debt in Excess of FMV Equals Cancellation of Debt Income ( CODI ) 17
18 TRANSFER OF PROPERTY TO THE LENDER (CONT D.) Recourse Debt Example: FMV Property $ 700,000 Debt $1,000,000 Sale Gain: Sales Price $ 700,000 $ 700,000 Basis $(500,000) $(800,000) Gain(Loss) $ 200,000 $(100,000) CODI* $ 300,000 $ 300,000 *Debt in Excess of FMV. Of course if pay deficiency, then there is no COD income. 18
19 CODI is Ordinary Income TRANSFER OF PROPERTY TO THE LENDER (CONT D.) Character of Sale Gain or Loss depends on character of property Capital Gain (e.g. raw land held for investment) or 1231 Capital Gain (e.g. rental property) or Ordinary Income (e.g. subdivision/dealer property) Impact of 1231 loss on characterization of future gains - Five Year Rule 19
20 COPING STRATEGIES: EXCLUSIONS OF COD INCOME IRC 108(a)-Gross income does not include amounts from discharge of indebtedness if: - The discharge occurs in Title11 (bankruptcy) case - The discharge occurs when taxpayer is insolvent - The discharge relates to qualified farm indebtedness - The discharge relates to qualified real property indebtedness realized by a taxpayer other than a C corporation - The discharge relates to qualified principal residence indebtedness realized before January 1,
21 COPING STRATEGIES: EXCLUSIONS OF COD INCOME ATTRIBUTE REDUCTION (CONT D.) In effect, attribute reduction forces the debtor to trade current exclusion of income for future tax deductions. The debtor can elect to change the order of reductions and draw down on tax basis first. The attribute reduction occurs on the first day of the tax year following the year of discharge. As a result, there are various planning techniques to minimize gain on sales in the year of discharge, etc. 21
22 COPING STRATEGIES: MORTGAGE FORGIVENESS DEBT RELIEF ACT OF 2007 The Mortgage Forgiveness Debt Relief Act of 2007 added new 108(a)(1)(E), which excludes from gross income the discharge of qualified principal residence indebtedness which takes place on or after January 1, 2007 and before January 1,
23 COPING STRATEGIES: APPLICATION TO PASS-THROUGH ENTITIES Cancellation of partnership debt: The bankruptcy and insolvency exceptions apply at the partner level, rather than the partnership level. So, if a partnership or LLC has debts which are discharged, there is no exclusion of COD income at that level. Instead the COD income is allocated to the partners. Generally, a partner with COD income could not qualify for the bankruptcy exception, but possibly could qualify for the insolvency exception. 23
24 COPING STRATEGIES: APPLICATION TO PASS-THROUGH ENTITIES (CONT D.) Cancellation of S corporation debt: The bankruptcy and insolvency exceptions do apply at the entity level in the case of an S corporation. So, if an S corporation has debts which are discharged while in bankruptcy, then the COD income is excluded and does not pass through to shareholders. If an S corporation qualifies for the insolvency exception, only the balance of the COD income is passed through to the shareholders. Generally, the attribute reduction applies at the S corporation level and does not travel down to shareholders. 24
25 COPING STRATEGIES: QUALIFIED REAL PROPERTY BUSINESS INDEBTEDNESS [QRPBI] A taxpayer can elect to exclude COD income that arises from Qualified Real Property Business Indebtedness Advantages exclusion does not require the debtor to be in bankruptcy or insolvent Disadvantages cannot be used by a C corporation amount excluded is generally equal to the balance of the debt less the FMV of the real property underlying the debt amount excluded cannot exceed the total tax basis of all the taxpayer s depreciable real property Triggers basis reduction on depreciable real property 25
26 What is QRPBI? COPING STRATEGIES: QUALIFIED REAL PROPERTY BUSINESS INDEBTEDNESS [QRPBI] (CONT D.) Generally, any debt incurred or assumed in connection with and secured by real property used in the taxpayer s trade/business. Broad sense of what is covered land, improvements, mineral interests. Application by Partnerships Whether debt is QRPBI is determined at the entity level, but basis limitation and reduction are made at partner level. S Corporations Whether debt is QRPHI is determined at the entity level, as are basis limitation and basis reduction. 26
27 COPING STRATEGIES: COD INCOME DEFERRAL ELECTION: THE 2009 LEGISLATION The American Recovery and Reinvestment Act of 2009 (the 2009 act), signed into law by President Obama on February 17, 2009, will have a significant impact on the retirement, modification, and restructuring of debt instruments during 2009 and
28 COPING STRATEGIES: COD INCOME DEFERRAL ELECTION: THE 2009 LEGISLATION (CONT D.) New IRC 108(i) allows an issuer of debt to elect to defer the inclusion of certain cancellation of debt (COD) income realized in 2009 and
29 COPING STRATEGIES: COD INCOME DEFERRAL ELECTION: THE 2009 LEGISLATION (CONT D.) If the election is made, COD income realized in calendar years 2009 and 2010 is generally includable ratably over a five-tax year period beginning in
30 COPING STRATEGIES: COD INCOME DEFERRAL ELECTION: THE 2009 LEGISLATION (CONT D.) The benefit of the deferral may be significantly curtailed by a requirement to defer deductions for some forms of interest expense incurred regarding the new debt capital. 30
31 COPING STRATEGIES: COD INCOME DEFERRAL ELECTION: THE 2009 LEGISLATION SPECIAL RULES FOR PARTNERSHIP First, in the case of partnerships, the election is made at the partnership, not the partner, level. 31
32 COPING STRATEGIES: COD INCOME DEFERRAL ELECTION: THE 2009 LEGISLATION SPECIAL RULES FOR PARTNERSHIP (CONT D.) Second, in the case of partnerships and other non-c corporation issuers of debt instruments, the election is limited to COD arising from debt instruments issued in connection with the conduct of a trade or business by the issuer. 32
33 COPING STRATEGIES: COD INCOME DEFERRAL ELECTION: THE 2009 LEGISLATION SPECIAL RULES FOR PARTNERSHIP (CONT D.) Third, the statute provides a specific mechanic for meshing the deferral of COD with general subchapter K principles: The partnership is treated as allocating the deferred COD income item to the partners immediately before the COD income realization event. 33
34 COPING STRATEGIES: COD INCOME DEFERRAL ELECTION: THE 2009 LEGISLATION SPECIAL RULES FOR PARTNERSHIP (CONT D.) There is a special rule to ensure that the relief of liabilities giving rise to the COD income under 752 does not create 731(a) gain to the partners, which would otherwise effectively defeat the purpose of the COD deferral. 34
35 COPING STRATEGIES: COD INCOME DEFERRAL ELECTION: THE 2009 LEGISLATION COMMENT AND OBSERVATIONS New IRC 108(i) is a deferral provision, which effectively creates an interest-free loan from the government. For this reason, tax attributes of the taxpayer are not reduced. 35
36 COPING STRATEGIES: LIKE KIND EXCHANGE NO EXCHANGE Non-Recourse Debt $10,000,000 Basis $( 5,000,000) Gain $ 5,000,000 Tax (State + Fed: 20%) $ 1,000,000 EXCHANGE Need to purchase replacement property for $10M or more. Instead of paying Uncle Sam $1M taxes, use the $1M to fund equity. Need $9M+ loan. 36
37 COPING STRATEGIES: LIKE KIND EXCHANGE (CONT D.) Seller financing or additional equity needed? Out of own pocket Add additional investors to the borrower partnership; admission of new investors generally is not a sale or exchange and the borrower partnership s tax ID number does not change. 37
38 Keep the Debt Outstanding OR: COPING STRATEGY: PURCHASE THE NOTE - Unrelated Friendly Party Purchaser: - Borrower may want to participate in discount by allowing a pre-payment discount upon satisfaction of specified conditions. - Discount upon mere passage of time? - Form NEWCO Purchaser: - Up to 49.9% overlapping ownership allowed. - For reasons discussed below, want debt modifications made prior to transfer. 38
39 COPING STRATEGY: JOINT VENTURE WITH LENDER Form NEWCO Borrower contributes property and Lender contributes cash to repay debt vs Lender cancels debt as capital contribution - Latter (and maybe former) approach requires analysis of FMV of partnership interest received by the Lender. To the extent FMV is less than face amount of debt, COD Income may result. - Former: Disguised sale issues? Recourse vs non-recourse debt. 39
40 COPING STRATEGY: JOINT VENTURE WITH LENDER (CONT D.) Query: If Lender receives $7M capital account for $10M debt, is there $3M COD Income? - What if $7M came back first with 12% per annum preferred return? If use applicable federal rate to determine value of partnership interest, can we conclude FMV equals $10M or do I need to get supporting appraisal? - Also, 752 analysis required to make sure elimination of debt does not trigger hypothetical cash distribution in excess of basis = gain (but it would be capital gain). - See earlier discussion of new COD deferral rules. 40
41 DISTRESSED DEBT FUND:TAX TRAPS - Fund formed for the purposes of purchasing non-performing or under performing debt. DANGER! DANGER! DANGER! - Modification of debt after acquisition requires same debt exchange analysis as described earlier. - Recall that a reduction in the interest rate or deferral of payments typically is not a problem for the Borrower because the present value of the new note under the applicable federal rate is still equal to face amount of the old note. 41
42 DISTRESSED DEBT FUND: TAX TRAPS (CONT D.) BORROWER: Amount Owed/New Note $10M Amount Owed/Old Note $10M COD Income $ 0 ORIGINAL LENDER: Not a problem for the original Lender either because its basis in the old note equals the original loan amount (i.e. the face amount of the old Note) Lender: FMV of New Note $10M Basis in Old Note: $10M Gain $ 0 42
43 PURCHASER OF DEBT: DISTRESSED DEBT FUND: TAX TRAPS (CONT D.) For the new holder of the note, however, this could be a big problem. FMV of New Note: $10M Basis in Old Note (e.g. discounted purchase price) $ 7M Phantom Gain* $ 3M * Short term capital gain or ordinary income depending on activities of holder of the note. 43
44 DISTRESSED DEBT FUND: TAX TRAPS LOAN MODIFICATIONS Solution: - If possible all modifications should be made by original lender prior to purchase of note. REMEMBER: MODIFY BEFORE YOU BUY 44
45 DISTRESSED DEBT FUND: TAX TRAPS (CONT D.) - Accrual Of Interest At Stated Rate (regardless of risk of non-payment)? - Original Issue Discount: - Purchaser inherits existing OID status phantom income? 45
46 MARKET DISCOUNT RULES: DISTRESSED DEBT FUND: TAX TRAPS (CONT D.) Amount of purchase discount is treated as interest equivalent. Periodic accrual of portion of the discount over the remaining term of the loan affects character of income associated with debt service payments (i.e. payments treated as ordinary income vs. return of capital). Also, gain on subsequent sale of debt is ordinary income to extent of accrued market discount. 46
47 CONCLUSIONS COD can crop up in surprising situations, particularly debt modifications. Transferring property in satisfaction of debt is usually a better tax result. 47
48 CONCLUSIONS (CONT D.) Coping strategies: Exclusion/ attribute reduction Deferral election Like-kind exchanges Friendly debt purchase 48
49 CONCLUSIONS (CONT D.) Buying debt has tax risks for the purchaser. It is usually better to modify debt before purchase. 49
50 Thank You For Joining Us for Real Estate Debt Workout Tax Issues & Coping Strategies Please contact our speakers with any questions after the presentation. Charles R. Beaudrot Partner, Tax and Real Estate Capital Markets Practices Timothy S. Pollock Partner, Tax, Real Estate and Real Estate Capital Markets Practices
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 informationHow To Restructure A Loan In Gorgonia
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 informationTax 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 informationCancellation 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 informationREAL 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 informationMortgage 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 informationIncome 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 informationReal 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 informationBank Giveth - Section 1001 Gain and COD Income
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 informationTAX ASPECTS OF DEBT MODIFICATION AND FORECLOSURE
MAY 19, 2010 TAX ASPECTS OF DEBT MODIFICATION AND FORECLOSURE Using Tax Savings to Make Better Distressed Debt Deals BRIAN DONNELLY DEAN GLOSTER Overview Tax Issues Are Certain, at the Death or Rebirth
More informationWORKING 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 informationTranscript 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 informationNH&RA Fall Developers Forum October 18-19, 2010 A Few Things to Remember About Debt Restructuring
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., Overview -- 1 The cancellation
More informationIncome 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 informationTax 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 informationCopyright 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 informationCommon 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 informationTaxpayers. 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 informationThe 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 informationReal 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 informationTreatment 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 informationPresented 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 informationTaxation 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 informationSelected 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 informationIs 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 informationInsolvency 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 informationDebt 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 informationM&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 informationFinancing 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 informationThe 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 informationTAX 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 informationSect. 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 informationDepartment 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 informationDEALING 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 informationAccording 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 informationDEBT FORGIVENESS AND MODIFICATION A Primer for the Non-Tax Attorney. Wayne R. Johnson, Esq.
DEBT FORGIVENESS AND MODIFICATION A Primer for the Non-Tax Attorney by Wayne R. Johnson, Esq. This article concludes a two-part examination of the general rules surrounding the tax treatment of debt forgiveness
More informationPENNSYLVANIA 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 informationLeveraging 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 informationForeclosures 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 informationCanceled 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 informationFederal 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 informationInvestors 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 informationHouse Bill 640 Ways and Means - State Tax Consequences
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 informationKey Federal Income Tax Considerations in Corporate Debt Restructurings
Key Federal Income Tax Considerations in Corporate Debt Restructurings By Keith E. Villmow and Olga A. Loy Keith Villmow and Olga Loy explain the key federal income tax considerations in corporate debt
More informationDISCHARGE 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 informationRESTRUCTURING 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 informationDepartment 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 informationContinuing 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 informationSOLUTIONS FOR THE MOST COMMONLY RECURRING TAX PROBLEMS OF FINANCIALLY DISTRESSED CLIENTS
SOLUTIONS FOR THE MOST COMMONLY RECURRING TAX PROBLEMS OF FINANCIALLY DISTRESSED CLIENTS By Condé Cox, Of Counsel, Greene & Markley PC, Portland Oregon (Copyright, Condé Cox, 2010) Foreclosures and financial
More informationASSEMBLY 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 informationNavigating 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 informationMortgage 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 informationREAL 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 informationInstructions for Forms 1099-A and 1099-C
2016 Instructions for Forms 1099-A and 1099-C Department of the Treasury Internal Revenue Service Acquisition or Abandonment of Secured Property and Cancellation of Debt Section references are to the Internal
More informationGeneral 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 informationCommon 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 informationSPECIAL 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 information2010 BANKRUPTCY TAX ISSUES. LINDA Z. SWARTZ CADWALADER LLP February 16, 2010
2010 BANKRUPTCY TAX ISSUES LINDA Z. SWARTZ CADWALADER LLP February 16, 2010 I m very grateful to Simon Friedman, Stuart Goldring and Carl Jenks for dreaming up some of the most interesting slides that
More informationDepartment 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 informationCANCELLATION 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 informationWith credit markets in turmoil, many questions have arisen as to the
10 US federal income tax consequences of investing in distressed MBS and mortgage assets Donald Gray Carden and Zey Nasser With credit markets in turmoil, many questions have arisen as to the US federal
More informationFORECLOSURE 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 informationFARM LEGAL SERIES June 2015 Tax Considerations in Liquidations and Reorganizations
Agricultural Business Management FARM LEGAL SERIES June 2015 Tax Considerations in Liquidations and Reorganizations Phillip L. Kunkel, Jeffrey A. Peterson, S. Scott Wick Attorneys, Gray Plant Mooty INTRODUCTION
More informationPart 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 informationReduction 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 informationForeclosures, 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 informationShifting Tactics and Strategies for Lenders in Workouts. March 3, 2010 New York, New York
Shifting Tactics and Strategies for Lenders in Workouts March 3, 2010 New York, New York Enforcement of Non-Monetary Defaults Foreclosure is an equitable action Equity vs. law Equitable actions are subject
More informationCancelled 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 informationWHY 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 informationHow Property Owners In Foreclosure\Short-Sale Can Avoid Paying Taxes On 1099\Foregiveness Of Debt
NEW PROBLEM-SOLVING RESEACH REPORT: How Property Owners In Foreclosure\Short-Sale Can Avoid Paying Taxes On 1099\Foregiveness Of Debt Albert Aiello Includes Avoidance Strategies For Both Home Owners In
More informationPage 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 informationSect. 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 informationForeclosures, 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 informationTax 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 informationThis 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 informationCancellation of Debt
Cancellation of Debt The Cancellation of Debt lesson is optional specialty training available only on Link & Learn Taxes for volunteers with an Advanced Certification. A separate certification is required
More informationMortgage Foreclosure Tax Issues
Mortgage Foreclosure Tax Issues 2321 N. Loop Drive, Ste 200 Ames, Iowa 50010 www.calt.iastate.edu October 8, 2007 - by Roger McEowen* Overview Numerous factors have contributed to the current problems
More informationMaking the Best of Bad Situations
Making the Best of Bad Situations Course Description & Study Guide This course will teach participants how to apply, implement, and evaluate the strategic tax aspects of marital dissolutions and living
More informationANALYSIS 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 informationbusiness owner issues and depreciation deductions
business owner issues and depreciation deductions Individuals who are owners of a business, whether as sole proprietors or through a partnership, limited liability company or S corporation, have specific
More informationno--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 informationInsalata Mista Something to Help Keep the Pounds Off Real Estate Restructurings Thursday, April 28, 2011 11:30 a.m. - 12:30 p.m.
2011 ANNUAL SPRING INVESTMENT FORUM American College of Investment Counsel Chicago, IL Insalata Mista Something to Help Keep the Pounds Off Real Estate Restructurings Thursday, April 28, 2011 11:30 a.m.
More informationDEBT 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 informationCANCELLATION OF DEBT INCOME AND OTHER STRATEGIC CONSIDERATIONS RELATED TO BANKRUPTCY AND WORKOUT OF TROUBLED LOANS
CANCELLATION OF DEBT INCOME AND OTHER STRATEGIC CONSIDERATIONS RELATED TO BANKRUPTCY AND WORKOUT OF TROUBLED LOANS PRESENTED BY: DAVID J. SCHWAB OF RALPH, SCHWAB & SCHIEVER, CHTD. and VASILLI D. RUSSIS
More information310-10-00 Status. General
Checkpoint Contents Accounting, Audit & Corporate Finance Library Standards and Regulations FASB Codification Codification Assets 310 Receivables 310-10 Overall 310-10-00 Status Copyright 2014 by Financial
More informationEXPLANATION OF INCOME TAX TREATMENT OF BAD DEBTS SINCE THE INTRODUCTION OF ACCRUALS RULES
APPENDIX C TO TIB NO.3, SEPTEMBER 1989 EXPLANATION OF INCOME TAX TREATMENT OF BAD DEBTS SINCE THE INTRODUCTION OF ACCRUALS RULES CONTENTS Page 1 INTRODUCTION 2 2 Bad Debts Outside the Accruals Regime 2
More informationVITA/TCE Specialty Course Cancellation of Debt (COD) Principal Residence Volunteer Income Tax Assistance (VITA) / Tax Counseling for the Elderly (TCE)
5182 VITA/TCE Specialty Course Cancellation of Debt (COD) Principal Residence Volunteer Income Tax Assistance (VITA) / Tax Counseling for the Elderly (TCE) 2014 COURSE AND TEST Take your VITA/TCE training
More information4942 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 informationA 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 informationHow should banks account for their investment in other real estate owned (OREO) property?
TOPIC 5: OTHER ASSETS 5A. REAL ESTATE Question 1: (December 2008) How should banks account for their investment in other real estate owned (OREO) property? Detailed accounting guidance for OREO is provided
More informationPURCHASING REAL ESTATE IN A SELF DIRECTED IRA OR QUALIFIED PENSION PLAN. By Maurice M. Glazer, CEO GLAZER FINANCIAL NETWORK
PURCHASING REAL ESTATE IN A SELF DIRECTED IRA OR QUALIFIED PENSION PLAN By Maurice M. Glazer, CEO GLAZER FINANCIAL NETWORK In today s market or lack of market, most baby boomers have most of their retirement
More informationANALYSIS 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 informationTaxation Issues Related to Debt Restructuring, Modifications, and Bankruptcies
Taxation Issues Related to Debt Restructuring, Modifications, and Bankruptcies Steven D. Bortnick, Esq. bortnicks@pepperlaw.com Michelle M. Moersfelder, Esq. moersfem@pepperlaw.com November 21, 2011 1
More informationFinal Actively Traded Debt Regulations: Implications for Debt Modifications and Exchanges
Final Actively Traded Debt Regulations: Implications for Debt Modifications and Exchanges By William R. Pomierski and Jeffrey K. Ekeberg Overview If an outstanding debt instrument is modified, or is exchanged
More informationIntroduction to Tax Equity Structures Part II. Tom Stevens Bill Fisher Deloitte Tax LLP
Introduction to Tax Equity Structures Part II Tom Stevens Bill Fisher Deloitte Tax LLP September 29, 2014 Introduction to Tax Equity Structures Part I Summary of Qualifying Resources and Facilities Partnership
More informationApple 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 informationPartner Level Loss Limits Secs. 704(d), 465, and 469. Chapter 10
Partner Level Loss Limits Secs. 704(d), 465, and 469 Chapter 10 CCA 201308028 10-11 Taxpayer Friendly view of Reg. 1.465-6(d) regarding guarantees of LLC debt 10-12 Under the "guarantee rule" of prop.
More informationWhen the IRS StRIkeS How to Get out of a Bind
Representing Non-Filers How Not to Lose Your EA License Vol.29 No.5 When the IRS StRIkeS How to Get out of a Bind Turning a Practice into a Business Member Resource Guide President s Message Capitol Corner
More informationAttention: 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 informationNH&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