How is relief of debt treated for tax purposes? Does it matter if the debt is recourse or non-recourse? Does it matter if the debtor is a separate entity guaranteed by the owner(s)? Does it matter if the debt is forgiven as part of a sale of property securing the debt? These issues were addressed…
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In May of this year the U.S. Tax Court issued a memorandum of opinion on the value of several assets included in the Estate of Michael Jackson (“Estate”) for federal estate tax purposes.[1] This opinion comes more than a decade after Jackson’s death in June of 2009 and provides some resolution (albeit subject to appeal)…
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A recent Tax Court opinion[1] highlights one of the risks of serving as executor or administrator of an estate, potential liability for a decedent’s tax obligations. The case involves application of the federal priority statute[2] applicable to fiduciaries.[3] That statute provides, in relevant part, that “a representative of a person or an estate (except a…
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On January 7, 2021, the IRS issued final regulations under § 1061 of the Internal Revenue Code (“Code”)[1]. These final regulations largely adopt the proposed regulations issued in July 2020[2] but contain a number of taxpayer favorable changes. As discussed below, the rules under § 1061 can apply in a number of situations such as…
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In a recent opinion out of the United States Court of Appeals for the Seventh Circuit, the Court upheld the Tax Court’s ruling that cash payments made from a family owned company to the son of the founder were not bona fide debts, and thus not deductible as bad debt expenses.[1] Additionally, the Court sided…
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Those of us who handle acquisition transactions can take for granted that asset acquisitions avoid the buyer assuming unintended liabilities of the seller. As a general rule, acquisitions of an entity’s equity cause the buyer to take any liabilities of the business conducted by the entity. However, asset acquisitions generally allow the buyer to selectively…
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In the recent Messina case, the Ninth Circuit Court of Appeals affirmed the decision of the Tax Court denying S corporation shareholders losses as a result of lack of basis, particularly in this case, debt basis. In rendering their opinions, the Ninth Circuit and Tax Court discussed a taxpayer’s ability to argue substance over form…
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