Because there is no clear statutory guidance for how a bankruptcy judge determines if a trustee’s request to apply substantive consolidation should be granted, each case is different.
This item provides an overview of the U.S. income tax implications of cancellation-of-debt income that results from bankruptcy or insolvency, with a focus on the differences in the tax treatment for C corporations, S corporations, and partnerships.
This article discusses the special rules and issues surrounding the classification of stock ownership of corporations that are insolvent or in bankruptcy.
While determining if a taxpayer is bankrupt is straightforward, determining whether a taxpayer is insolvent can be tricky.
The tax treatment of an insolvent debtor realizing discharge of indebtedness income under the U.S. consolidated income tax return rules can vary considerably depending on the particular circumstances.
The IRS issued a general legal advice memorandum that addressed the tax consequences when an insolvent foreign subsidiary of a domestic U.S. corporation elected to be classified as a partnership.
The Seventh Circuit affirmed a bankruptcy court’s refusal to confirm a bankruptcy plan and its dismissal of the bankruptcy proceeding because the principal purpose was to avoid taxes. The court said the filing was in bad faith and did not serve the proper purpose of bankruptcy law.
The American Recovery and Reinvestment Act of 2009 provides certain business debtors with a cancellation of debt (COD) income deferral election under new Sec. 108(i) for reacquisitions by the debtor or by certain related parties of applicable debt instruments after December 31, 2008, and before January 1, 2011.
Treasury recently finalized regulations, effective for transactions occurring after December 12, 2008, for applying the continuity-of-interest (COI) requirement to insolvent corporations (T.D. 9434).
Rev. Proc. 2008-63 permits securities lenders continued nonrecognition treatment under Sec. 1058(a) for certain securities loans terminated due to the bankruptcy of the securities borrower, provided the lender applies the collateral to the purchase of identical securities within 30 days of the default.