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Bankruptcy and Insolvency Taxation, 4th Edition

ISBN: 978-1-118-00077-9
740 pages
February 2012
Bankruptcy and Insolvency Taxation, 4th Edition (1118000773) cover image
The thousands of mergers, acquisitions, and start-ups that have characterized the past 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. Fully revised and updated with new case studies and the latest coverage of regulations, Bankruptcy and Insolvency Taxation, Fourth Edition provides the answers to the questions financial managers will have on the tax aspects of bankruptcy strategy.
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Preface ix

Chapter One: Nature of Bankruptcy and Insolvency Proceedings 1

§ 1.1 Objectives 2

§ 1.2 Alternatives Available to a Financially Troubled Business 4

Chapter Two: Discharge of Indebtedness 27

§ 2.1 Introduction 30

§ 2.2 Discharge of Indebtedness Income 30

§ 2.3 Determination of Discharge of Indebtedness Income 31

§ 2.4 Section 108(e) Additions to Discharge of Indebtedness Income 46

§ 2.5 Section 108(e) Subtractions from Discharge of Indebtedness Income 66

§ 2.6 Discharge of Indebtedness Income Exclusions 71

§ 2.7 Consequences of Qualifying for Section 108(a) Exclusions 81

§ 2.8 Section 108(i) Deferral and Ratable Inclusion of DOI from Business Indebtedness Discharged by the Reacquisition of a Debt Instrument 97

§ 2.9 Use of Property to Cancel Debt 106

§ 2.10 Consolidated Tax Return Treatment 117

§ 2.11 Discharge of Indebtedness Reporting Requirements 138

Chapter Three: Partnerships and S Corporations: Tax Impact of Workouts and Bankruptcies 143

§ 3.1 Introduction 144

§ 3.2 Partnerships 144

§ 3.3 S Corporations 161

Chapter Four: Taxation of Bankruptcy Estates and Debtors 173

§ 4.1 Introduction 174

§ 4.2 Responsibility for Filing Income Tax Returns 174

§ 4.3 Accounting for the Bankruptcy Estate 177

§ 4.4 Accounting for the Debtor (Individual) 215

§ 4.5 Summary 228

Chapter Five: Corporate Reorganizations 231

§ 5.1 Introduction 232

§ 5.2 Elements Common to Many Reorganization Provisions 233

§ 5.3 Overview of Specific Tax-Free Reorganizations under Section 368 249

§ 5.4 Acquisitive Asset Reorganizations 249

§ 5.5 Stock Acquisitions 261

§ 5.6 Single-Entity Reorganizations 270

§ 5.7 Divisive Reorganizations 275

§ 5.8 Insolvency Reorganizations 286

§ 5.9 Summary 309

Chapter Six: Use of Net Operating Losses 311

§ 6.1 Introduction 313

§ 6.2 I.R.C. Section 381 315

§ 6.3 Restructuring under Prior I.R.C. Section 382 320

§ 6.4 Current I.R.C. Section 382 322

§ 6.5 I.R.C. Section 383: Carryovers Other than Net Operating Losses 396

§ 6.6 I.R.C. Section 384 397

§ 6.7 I.R.C. Section 269: Transactions to Evade or Avoid Tax 401

§ 6.8 Libson Shops Doctrine 406

§ 6.9 Consolidated Return Regulations 407

Chapter Seven: Other Corporate Issues 425

§ 7.1 Introduction 426

§ 7.2 Earnings and Profits 426

§ 7.3 Incorporation 430

§ 7.4 Liquidation 434

§ 7.5 I.R.C. Section 338 440

§ 7.6 Limited Liability Corporation 454

§ 7.7 Other Tax Considerations 454

§ 7.8 Administrative Expenses 457

§ 7.9 Other Administrative Issues 465

Chapter Eight: State and Local Taxes 471

§ 8.1 Introduction 471

§ 8.2 Bankruptcy Estates 472

§ 8.3 Stock for Debt 479

§ 8.4 Cancellation of Indebtedness 479

§ 8.5 Net Operating Loss Carryback and Carryover 480

§ 8.6 Stamp Tax 481

§ 8.7 Tax Impact of Plan for State and Local Purposes 485

Chapter Nine: Tax Consequences to Creditors of Loss from Debt Forgiveness 487

§ 9.1 Introduction 488

§ 9.2 Nature of Losses 488

§ 9.3 Business and Nonbusiness Losses 490

§ 9.4 Determination of Worthlessness 501

§ 9.5 Secured Debt 509

§ 9.6 Reorganization 516

Chapter Ten: Tax Procedures and Litigation 519

§ 10.1 Introduction 520

§ 10.2 Notice and Filing Requirements 520

§ 10.3 Tax Determination 521

§ 10.4 Bankruptcy Courts 575

§ 10.5 Minimization of Tax and Related Payments 578

Chapter Eleven: Tax Priorities and Discharge 581

§ 11.1 Introduction 582

§ 11.2 Priorities 582

§ 11.3 Tax Discharge 635

Chapter Twelve: Tax Preferences and Liens 669

§ 12.1 Introduction 669

§ 12.2 Tax Preferences 669

§ 12.3 Tax Liens 675

About the Authors 703

About the Web Site 704

Statutes Citations 705

Treasury Regulations, Revenue Procedures, and Revenue Rulings Citations 714

Case Index 722

Subject Index 732

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