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Debt Restructuring and Workouts


A debt restructuring can result in debtor taxation without any receipt of cash if not carefully structured.

We advise creditors and debtors regarding reporting obligations, bad debt deductions and income arising from cancellation of indebtedness as a consequence of business debt restructuring and workouts, in an effort to assure compliance with the law while minimizing the adverse tax consequences to the debtor.

We regularly advise on such matters as:

  • Cancellation of Debt Income Arising From Debt Cancellation, Reduction or Modification.
  • Exceptions to Cancellation of Debt Income Rule.
  • Differences in Application of Cancellation of Debt Income Rules Among Partnerships, C Corporations and S Corporations.
  • Entity Conversions, Spin-Offs and Split-Ups.
  • Gain or Loss Arising from Transfer of Property.
  • Recourse Versus Nonrecourse Debt.
  • Equity Issued in Satisfaction of Debt.
  • Acquisition of Debt by Related Party.
  • Documentation of Debt Modifications.
  • Creditor IRS Reporting Obligations.
  • Tax Considerations for Creditors.