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Tax Tips - Recourse vs Nonrecourse Indebtedness in a Debt Workout: - Tax Tips - Cancellation of Indebtedness (00147687).PDF (PDF)
Sunday, February 01, 2009
Category:  < Taxation

 

A consequence of today’s difficult market conditions, with asset prices declining below principal balances of debt obligations, is that a client may have to go through the difficult process of working out their debts with their lender. If your client manages to work out a settlement with the lender, the reality will soon set in that his or her hard work will result in an unexpected tax liability. The amount subject to tax will depend upon whether the debt is recourse or nonrecourse, and how the debt workout is structured. While the tax analysis of a debt workout are too complicated to summarize here, the following is intended to help you identify the key issues that can impact your client’s tax liabilities when dealing with recourse versus nonrecourse debt.

View Tax Tips - Cancellation of Indebtedness (00147687).PDF (PDF)

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