Renegotiated Debt: The Search for Standards
Georgia State University College of Law
Harold L. Adrion
affiliation not provided to SSRN
Tax Lawyer, Vol. 44, No. 4, 1991
This article examines, from the creditor’s standpoint, four basic tax issues that must be resolved to properly report the tax effect of debt renegotiation: first, the circumstances under which a debt renegotiation is properly classified as a taxable exchange under section 1001; second, the appropriate rules for determining the amount of the gain or loss resulting from the transaction, if a taxable exchange has occurred; third, whether any realized loss is recognized under section 1001(c) and deductible under some provision of the Code, most likely under sections 165 or 166; and finally, how to deal with the fact that the statute has been misapplied in Revenue Ruling 89-122 and in the recent opinions of two circuit courts. Further, this paper will argue that the statute has been encumbered by a formalistic rule recently elevated in the Supreme Court opinion in Cottage Savings Association v. Commissioner.
Number of Pages in PDF File: 69
Keywords: tax, taxation, tax law, section 1001, Revenue Ruling 89-122, debt renegotiation, debt, Cottage Savings Association v. Commissioner
JEL Classification: K34Accepted Paper Series
Date posted: October 13, 2009
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