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Bankruptcy and Insolvency Taxation, 3rd Edition

ISBN: 978-0-471-65686-9
768 pages
May 2005
Bankruptcy and Insolvency Taxation, 3rd Edition (0471656860) cover image


The thousands of mergers, acquisitions, and start-ups that have characterized the past ten years of business have created an increasing number of corporations in financial trouble: specifically, a shortage of venture capital or quick cash. Consequently, bankruptcy protection is now viewed as a strategic move to protect corporations from their creditors and allow them to reorganize. Bankruptcy and Insolvency Taxation, Third Edition provides the answers to the questions financial managers will have on the tax aspects of the "bankruptcy strategy."
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Table of Contents


Chapter One: Nature of Bankruptcy & Insolvency Proceedings.

1.1 Objectives.

1.2 Alternatives Available to a Financially Troubled Business.

Chapter Two: Discharge of Indebtedness.

2.1 Introduction.

2.2 Discharge of Indebtedness Income.

2.3 Determination of Discharge of Indebtedness Income.

2.4 Section 108(e) Additions to Discharge of Indebtedness Income.

2.5 Section 108(e) Subtractions from Discharge of Indebtedness Income.

2.6 Discharge of Indebtedness Income Exclusions.

2.7 Consequences of Qualifying for Section 108(A) Exclusions.

2.8 Use of Property to Cancel Debt.

2.9 Consolidated Tax Return Treatment.

2.10 Discharge of Indebtedness Reporting Requirements.

Chapter Three: Partnerships and S Corporations: Tax Impact of Workouts and Bankruptcies.

3.1 Introduction..

3.2 Partnerships.

3.3 S Corporations.

Chapter Four: Taxation of Bankruptcy Estates and Debtors.

4.1 Introduction.

4.2 Responsibility for Filing Income Tax Returns.

4.3 Accounting for the Bankruptcy Estate.

4.4 Accounting for the Debtor (Individual).

4.5 Summary.

Chapter Five: Corporate Reorganizations.

5.1 Introduction.

5.2 Elements Common to Many Reorganization Provisions.

5.3 Overview of Specific Tax-Free Reorganizations Under Section 368.

5.4 Acquisitive Reorganizations.

5.5 Stock Acquisitions.

5.6 Single Entity Reorganizations.

5.7 Divisive Reorganizations.

5.8 Insolvency Reorganizations.

5.9 Summary.

Chapter Six: Use of Net Operating Losses.

6.1 Introduction.

6.2 I.R.C. Section 381.

6.3 Restructuring Under Prior I.R.C. Section 382.

6.4 Current I.R.C. Section 382.

6.5 I.R.C. Section 383: Carryovers other than Net Operating Losses.

6.6 I.R.C. Section 384.

6.7 I.R.C. Section 269: Transactions to Evade or Avoid Tax.

6.8 Libson Shops Doctrine.

6.9 Consolidated Return Regulations.

Chapter Seven: Other Corporate Issues.

7.1 Introduction.

7.2 Earnings and Profits.

7.3 Incorporation.

7.4 Liquidation.

7.5 I.R.C. Section 338.

7.6 Other Tax Considerations.

7.7 Administrative Expenses.

7.8 Other Administrative Issues.

Chapter Eight: State and Local Taxes.

8.1 Introduction.

8.2 Income from Debt Discharge.

8.3 Net Operating Loss Carryback and Carryover.

8.4 Bankruptcy Estate.

8.5 Responsibility for Filing Tax Returns.

8.6 Stamp Tax.

8.7 Summary.

Chapter Nine: Tax Consequences to Creditors of Loss from Debt Forgiveness.

9.1 Introduction.

9.2 Nature of Losses.

9.3 Business and Nonbusiness Losses.

9.4 Determination of Worthlessness.

9.5 Secured Debt.

9.6 Reorganization.

Chapter Ten: Tax Procedures and Litigation.

10.1 Introduction.

10.2 Notice and Filing Requirements.

10.3 Tax Determination.

10.4 Bankruptcy Courts.

10.5 Minimization of Tax and Related Payments.

10.6 Appendix: Forms.

Chapter Eleven: Tax Priorities and Discharge.

11.1 Introduction.

11.2 Priorities.

11.3 Tax Discharge.

Chapter Twelve: Tax Preferences and Liens.

12.1 Introduction.

12.2 Tax Preferences.

12.3 Tax Liens.

Appendix A: Internal Revenue Code: Selected Sections.

Appendix B: Senate Report No. 96-1035 on H.R. 5043—Bankruptcy Tax Act of 1980.

Appendix C: Senate Proposed Amendments to H.R. 5043 (Bankruptcy Tax Act of 1980) Adopted by Both Senate and House.

Appendix D: Representative Ullman’s Statement Regarding Bankruptcy Tax Legislation.

Appendix E: Selected Provisions from the General Explanation of the Tax Reform Act of 1986 (H.R. 3838, 99th Congress; Public Law 99-514).

Appendix F: Selected Provisions from the Explanation of the Technical and Miscellaneous Revenue Act of 1988.

Appendix G Tax Consequences of Plan—Revco.

Statutes Citations.

Treasury Regulations, Revenue Procedures, and Revenue Rulings Citations.

Case Index.

Subject Index.

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Author Information

Grant W. Newton, Professor of Accounting, Graziadio School of Business and Management, Pepperdine University, Malibu, California, is the author of Bankruptcy and Insolvency Accounting; Practice and Procedure (updated annually) and Corporate Bankruptcy (2003), also published by John Wiley & Sons. He is the Executive Director of the Association of Insolvency and Restructuring Advisors and he developed and teaches the three courses that lead to the Certified Insolvency and Restructuring Advisor (CIRA) designation. A CPA, CIRA, and CMA, he received a Ph.D. from New York University, a Master’s degree from the University of Alabama, and a B.S. Degree from the University of North Alabama.
Dr. Newton was a member of the AICPA’s Task Force on Financial Reporting by Entities in Reorganization Under the Bankruptcy Code that resulted in the issuance of the Statement of Position 90-7. He is coauthor of Consulting Services Practice Aid 02-1: Business Valuation in Bankruptcy and Providing Bankruptcy & Reorganization Services—Practice Aid, both published by the AICPA. He serves as a consultant and expert witness on issues dealing with financial reporting during and emerging from chapter 11, valuation, terms of plan, tax impact of plan, tax issues related to the bankruptcy estate, and recovery of assets.

Robert Liquerman is a principal in KPMG LLP’s Washington National Tax Practice, Corporate Tax Group, specializing in matters under Subchapter C of the Internal Revenue Code. He is an adjunct professor of law in the LL.M. program at the Georgetown University Law Center and previously served as an adjunct professor in the LL.M. program at The College of William & Mary, Marshall-Wythe School of Law. Mr. Liquerman holds an LL.M. in Taxation from New York University School of Law; a J.D. from St. John’s University, School of Law; and a B.S. in Accounting from the State University of New York at Binghamton.
He joined KPMG LLP from the Internal Revenue Service Office of the Chief Counsel, Corporate Division. In this position, he drafted treasury regulations, private letter rulings, technical advice memoranda, closing agreements, responses to congressional inquiries, field service advice, and memoranda of law. Prior to his government experience, Mr. Liquerman was a senior tax associate in the mergers and acquisition group and the insurance group in the New York office of Coopers & Lybrand.
He is a frequent speaker on bankruptcy and tax issues at various tax institutes and conferences around the country, including Tax Executives Institute, Federal Bar Association, DC Bar Association, and the Association of Insolvency and Restructuring Accountants. Mr. Liquerman is a member of the American Bar Association, Section of Taxation.
Although Chapters 2, 5, 6, and 7 reflect the views of Robert Liquerman, they do not necessarily reflect the views of KPMG, LLP.

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"This book will provide valuable guidance for those who find themselves involved in bankruptcy taxation for individuals or businesses." (Strategic Finance, April 2007)
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