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Bankruptcy and Insolvency Taxation, 4th Edition by Robert Liquerman, Grant W. Newton

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CHAPTER THREE

Partnerships and S Corporations

Tax Impact of Workouts and Bankruptcies

§ 3.1 Introduction

§ 3.2 Partnerships

(a) General Provisions

(b) Responsibility for Filing Tax Returns

(i) Partnership Entity

(ii) Partnership Disposition

(iii) Administrative Expenses

(c) Types of Debt Restructurings

(i) Modification of Terms

(ii) Purchase Price Reduction

(iii) Reduction of Principal

(A) Cancellation of Real Property Business Indebtedness 150

(iv) Exchange of Debt for Partnership Interest

(d) Partnership Impact

(e) Partner-Level Impact

(i) Reporting by Partners

(ii) Allocation to Individual Partners

(iii) Discharge of Partnership Debt

(f) Tax Attribute Reduction

(g) Character of Debt

(i) Allocation to Passive Activities

(h) Reduction of Partnership Interest

(i) Senate Committee Report

(j) Exchange of Partnership Interest for Debt

(k) Abandonment of Partnership Interest

(l) Impact of Partner Bankruptcies

§ 3.3 S Corporations

(a) General Provisions

(b) Responsibility for Filing Corporate Returns

(c) Tax Attribute Reduction

(d) Exceptions

(e) Impact on Shareholder

(f) Impact of Termination

(g) Debt Modifications and Restructurings

(h) Reorganization under Section 368

(i) Liquidations

(j) Bankruptcy Estate

(k) Shareholder Bankruptcy

(l) Shareholder Guarantee

§ 3.1 INTRODUCTION

As the number of real estate failures and workouts has increased, the tax consequences of debt modifications and discharge of partnership debt, exchange of partnership interest for debt, and termination of ...

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