June 24, 2020
Debt Relief: Breaking Down the Tax Aspects of Covid-19's Economic Impact – Part IV, Modifications of Indebtedness...
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Modifying the terms of indebtedness, as opposed to cancelling or discharging the indebtedness, leaves the indebtedness outstanding but revises the terms governing the obligation. For example, the lender and borrower of a debt instrument may adjust the interest rate, change the collateral underlying the obligation, or defer or otherwise adjust the schedule of payments made on the debt instrument. Whether such a change in terms results in tax consequences is dependent on the terms of the original, unmodified indebtedness instrument, as well as the nature and extent of the changes made.
June 16, 2020
Debt Relief: Breaking Down the Tax Aspects of Covid-19's Economic Impact – Part III, Defining Indebtedness...
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Indebtedness has been a central focus of Parts I and II of this series, and it will continue to be a key concept in future posts as we explore in further detail the COD Income exceptions and discuss potential tax consequences resulting from modifications of indebtedness. In order to fully grasp the concepts discussed throughout this series, a baseline understanding of what the term "indebtedness" means is necessary. This Part III seeks to provide a brief introduction to the history of indebtedness in the tax law and serve as a guide to understanding what constitutes indebtedness.
May 29, 2020
Debt Relief: Breaking Down the Tax Aspects of Covid-19's Economic Impact - Part II...
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As discussed in Part I of this series, the cancellation of indebtedness, whether in whole or in part, generally results in COD Income to a taxpayer which must be included in gross income. Section 108 of the Internal Revenue Code (the "Code"), though, provides a handful of exceptions to this general rule of income inclusion. However, due to Covid-19, Congress has expanded exceptions to the general COD Income rule beyond those in section 108. Furthermore, it is possible, based on measures passed during prior economic crises, that Congress will pass additional exceptions to the general COD Income rule and that situations will arise in which COD Income exceptions may be expanded beyond their typical scope.
May 8, 2020
Debt Relief: Breaking Down the Tax Aspects of Covid-19's Economic Impact – Part I....
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This is the first in a series of blogs which will address various tax aspects of loan modification, debt relief, restructuring, bankruptcy, and other topics that will likely be at the forefront of the legal landscape in the near future as a result of Covid-19. The posts in this series, while not exhaustive of all topics, will provide guidance on important practice points and raise several issues taxpayers and practitioners should be aware of. The first topic in the series, cancellation of indebtedness, illustrates the often-unexpected tax consequences accompanying relief from indebtedness.
April 9, 2020
IRS PROVIDES PARTNERS—AND PARTNERSHIP TAX PROFESSIONALS—RELIEF IN REV. PROC. 2020-23...
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For those partnerships who had not elected early application or validly elected out, the 2018 tax year was the first year in which the new partnership audit rules, enacted by the Bipartisan Budget Act of 2015 (the "BBA"), took effect.