Cancellation of Debt Income: Tax Consequences

Navigating Section 108 Issues With Debt Discharge and Forgiveness, Loan Modifications, Foreclosures and Short Sales

Recording of a 110-minute premium CLE/CPE webinar with Q&A

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Conducted on Tuesday, April 24, 2012

Recorded event now available

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This teleconference will provide tax law advisors with a review of the income tax ramifications of debt forgiveness, loan modifications, and the loss of residential property through foreclosure, deed-in-lieu and short sale.

Description

Consumers that negotiate debt on unsecured loans or credit cards often face income tax liability for forgiven or cancelled debt. Similarly, individuals who dispose of homes with underwater mortgages through foreclosure, deeds-in-lieu or short sales may face COD income.

Although debts discharged through bankruptcy are not considered taxable income, discharged debt can be applied to reduce any tax attributes of the taxpayer, such as net operating losses, capital loss carryforwards, and basis reductions.

To choose the best course of action for clients, counsel must understand the tax impact of debt forgiveness, loan modifications or loss of residential property through foreclosure or short sale to properly report and plan for the tax consequences.

Listen as our authoritative panel of attorneys guides you through the income tax ramifications of debt forgiveness, loan modifications, and loss of residential property through foreclosure, deed-in-lieu and short sales.

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Outline

  1. COD Income
    1. Debt forgiveness
    2. Loan modifications
    3. Foreclosures, deeds-in-lieu and short sales
  2. COD income exclusions
    1. Bankruptcy
    2. Insolvency
    3. Qualified principal residence indebtedness
  3. Contested debt doctrine
  4. Reporting to the IRS

Benefits

The panel will review these and other key questions:

  • Under what circumstances can COD income arising from a loan modification be excluded—and what are the consequences of this exclusion?
  • What are the income tax implications for individuals who lose their principal residence through foreclosure v. deed-in-lieu v. short sale?
  • What are the parameters of the contested debt doctrine?

Following the speaker presentations, you'll have an opportunity to get answers to your specific questions during the interactive Q&A.

Faculty

Stephen J. Dunn
Stephen J. Dunn
Partner
DUNN Counsel

Mr. Dunn represents entrepreneurs and much of his work involves civil tax controversies. These include research...  |  Read More

David N. Stonehill
David N. Stonehill
Principal Attorney
David N. Stonehill

He has a nationwide federal income tax practice focusing on taxation of cancellation of debt income reported on Form...  |  Read More

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