The Law Firm Ballard Spahr recently issued an alert on a interesting provision from the American Recovery & Reinvestment Act that allows tax payers to defer cancellation of indebtedness income. The alert is excerpted below:
“On August 17, 2009, the Internal Revenue Service released Revenue Procedure 2009-37, 2009-36 I.R.B. (Sept. 8, 2009) (Revenue Procedure) describing the steps that taxpayers should follow in making elections to defer cancellation of indebtedness income (COD income) under Section 108(i) of the Internal Revenue Code. Section 108(i) was enacted last spring by the American Recovery and Reinvestment Tax Act and is the principal tax relief provision in the economic stimulus legislation available to taxpayers in workout situations.
Following the enactment of Section 108(i), numerous commentators expressed concern as to how the election would operate with respect to partnerships, S corporations, REITs and RICs, and members of consolidated return groups. The Revenue Procedure resolves the principal issues raised with respect to each of these entities in a taxpayer-favorable manner. For more information on the Revenue Procedure, click here.”