Cancellation of Indebtedness Income: Mastering Latest Guidance

Description

The 2009 American Recovery and Reinvestment Act's creation of IRC Sect. 108(i) allows taxpayers incurring cancellation of indebtedness (COD) income an election to defer certain reacquired debts. The IRS has now issued vital interpretive guidance.

Revenue Procedure 2009-37 outlines how to make a COD income deferral election and gives taxpayers extra flexibility in the election on various debt instruments. It is also particularly favorable to partnerships. New regulations in TD 9461 redraw certain IRS COD income information returns.

These are just the first installments of critical guidance on COD income, which can be created via a multitude of activities, from interest rate reductions to asset and stock transfers. Advisors and corporate taxpayer clients must stay current to make sophisticated compliance and planning decisions.

Listen as our panel of seasoned experts in cancellation of indebtedness laws and regs guides you through the latest guidance on identifying COD income and taking the deferral, for tax purposes.

Outline

1. Revenue Procedure 2009-37
   1. Election procedures and partial elections
   2. Debt-by-debt elections
   3. Protective elections
   4. Guidance for partnership-level election, partner-level consequences
   5. Guidance for S corporations
2. TD 9461
   1. Reductions in information required on info returns from some taxpayers
   2. Special protections for debtors relying on those reports
3. Review of classification of COD income under Sect. 108(i)
   1. Deferred benefit for reacquired debt instruments
   2. Situations in which it may be more prudent not to defer
4. Outlook for future IRS interpretive guidance
5. Tax planning and compliance considerations
   1. Best practices for documenting election procedures
   2. Timing of cancellation of indebtedness
   3. Including COD income in federal returns

Benefits

The panel will analyze IRS guidance and cancellation of debt issues that are key to survival in this economy, including:

• Revenue Procedure 2009-37: Understanding its terms and the debt instruments to which it applies—and making the necessary tax planning decisions.
• Sect. 108(i): Staying informed of asset transfers, debt exchanges and stock transactions that fall under the COD umbrella; and of situations and transactions that are excluded from COD income.
• TD 9461: Which taxpayers have to file a COD income information return, what has to be reported, how debtors are protected.

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