Gross income generally includes income realized by a debtor from the cancellation of debt (COD) subject to certain exceptions. Where COD income is excluded from gross income under the exceptions to the general rule, taxpayers generally must reduce certain tax attributes (such as net operating loss and tax credit carryovers or depreciable tax basis), by the amount of the debt canceled.
Companies may now be able to avoid this reduction in tax attributes due to a recent law change. If your business has COD income, the information contained in this column may have significant benefits for your business.
For more information on the most recent provision that addresses how COD income is recognized, click here to read, “Cancellation of Debt Income” from the February issue of Builders Exchange Magazine or contact our Real Estate and Construction Group at 440-449-6800.