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Pass-Through Entities and COD Income: Sheltering Solvent Entity Owners From Insolvent Entity Taxable COD Income

Section 108 Relief, Qualified Real Property Indebtedness, Reducing Tax Attributes, and Entity Restructuring

Note: CLE credit is not offered on this program

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

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Conducted on Wednesday, November 11, 2020

Recorded event now available

or call 1-800-926-7926

This course will provide tax advisers and counsel with a review of insolvent pass-through entities and the options available to protect solvent owners from realizing taxable cancellation of debt (COD) income. The program will highlight how COD income is treated for various types of business entities under the IRC and discuss IRC Section 108 exclusions, as well as focus on recent developments that provide a strategy for protecting solvent owners of insolvent pass-through entities.


COD poses particular federal tax problems for the owners of insolvent pass-through entities, especially when the owners themselves are not insolvent. Generally, the owners of pass-through entities are apportioned COD taxable income whenever a pass-through entity has its debt canceled. As a result, solvent owners may be responsible for paying significant taxes on COD income allocated to them by the entity.

In the current economic environment, tax professionals must understand the impact of COD income on both solvent and insolvent taxpayers. This includes being aware of opportunities to circumvent the recognition of COD income. Pairing eligible taxpayers with available opportunities, including insolvency, reduction of tax attributes, qualified real property indebtedness, loss carryforwards, debt and entity restructuring can prevent or lessen recognition of income by often unwary partners and shareholders.

Listen as our panel reviews and provides guidance on proper handling of COD taxable income. The panel will focus on the way COD income is treated for various types of business entities under the IRC and discuss IRC Section 108 exclusions.



  1. Cancellation of debt income
  2. COD income and partnerships
  3. COD income and S corporations
  4. Exceptions to income recognition


The panel will review these and other notable issues:

  • What is the impact of the dual authority for insolvent pass-through entity owners to terminate and elect entity tax classification?
  • What are the key differences in handling insolvency for shareholders and partners?
  • What tax attributes can defer gain recognition, and how are they ordered?
  • Which taxpayers are eligible for the qualified real property indebtedness relief?
  • What guidance can tax advisers offer to overcome creditor challenges to an insolvent pass-through changing its tax status to avoid attribution of COD income to its owners?


Amaya-Lainez, Mario
Mario Amaya-Lainez, CPA

Senior Manager, National Tax Office - Partnerships

Mr. Amaya-Lainez specializes in partnership taxation with a primary focus on partnership restructurings, such as...  |  Read More

Gruidl, Nick
Nick Gruidl

Partner, Washington National Tax

Mr. Gruidl has experience working with both publicly held and privately held businesses. His client service focus...  |  Read More

Keida, Brian
Brian Keida, CPA

Tax Managing Director

With more than thirteen years of public accounting experience, Mr. Keida’s industry focus has been serving...  |  Read More

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