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Insights Cancellation of Indebtedness Income

Final Regulations for Cancellation of Debt Income Involving Partnerships with Disregarded Entities and Grantor Trusts as Partners

June 22, 2016 Cancellation of Indebtedness Income

Treasury recently finalized regulations clarifying the application of the bankruptcy and insolvency exceptions to cancellation of debt income involving a debtor partnership with one or more partners that are disregarded for income tax purposes. Section 108(a)(1)(A) and (B) exclude cancellation of debt from income if the cancellation or discharge occurred…

IRS Expands Cancellation of Indebtedness Income Exclusion

February 13, 2014 Cancellation of Indebtedness Income

When a lender discharges debt for less than full consideration, the borrower by default recognizes income for federal income tax purposes. “Qualifying Real Property Indebtedness” is an exception. Forgiveness of Qualifying Real Property Indebtedness may be excluded from income. New IRS guidance expands this exclusion. The Qualifying Real Property Indebtedness…