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I. Tax Consequences of Home Foreclosures and Abandonments
A. General Tax Principles
* Income is any accession to wealth clearly realized
* Income on a sale of property is measured by the difference between the "amount realized" on the sale and the taxpayer's "basis"
* Basis of property depends upon how it was acquired
- Purchase = amount paid including nonrecourse debt
- Gift = transferor's basis in property
- Inheritance = fair market value at time of death
* Basis of property may fluctuate over time
- Depreciation decreases basis
- Improvements increase basis
- Additional debt on property (such as refinancing) without improvements does not increase basis
* The Internal Revenue Code sometimes provides that income that has been realized will not be taxed currently because of public policy reasons
- Some income resulting from transfers of property may be deferred until a later event, these are called nonrecognition rules - common examples include:
- §1031 Exchanges of like-kind property
- §1034 Rollover of gain on sale of personal residence
- §721 contribution of property to a partnership
- §731 distribution of property from partnership
- §351 contribution of property to corporation
- various provisions regarding transfers to/from trusts
- §1398 transfer of property to or from a bankruptcy estate
- Sometimes Congress decides certain types of income from transfer of property should not be taxed at all, these are called exclusions from income - common examples include:
- §108 exclusion of COD income where taxpayer is bankrupt or insolvent
- Old §121 one-time exclusion of gain ($125,000) for taxpayer over 55
- New §121 exclusion of up to $500,000 of gain from sale of personal residence permitted every two years
* Taxpayers have attributes that are personal to them because of their personal tax history
- NOLs
- Capital losses
- Passive activity losses
- Credits (business, AMT, foreign tax)
- Basis in property
* Nonrecognition provisions and exclusionary rules apply to everyone and are granted by Congress; attributes are personal to the taxpayer and result from his or her behavior
* Income and losses have character!
- Personal - losses not usable
- Capital- new maximum rate of 20%
- Ordinary - maximum rate of 39.6%
- Passive - can only offset each other
- COD - taxed at ordinary rate unless Section 108 exclusion applies
- Recapture (tax benefit income, depreciation recapture)- taxed at ordinary rate
B. Foreclosure or Transfer by Deed in Lieu of Foreclosure
It is well settled that a voluntary disposition of property through a deed in lieu of foreclosure or an involuntary disposition of property through foreclosure constitutes a sale or exchange for federal income tax purposes.1 1001(a) provides that gain or loss recognized to a taxpayer in connection with the sale or disposition of property is measured by the difference between the amount realized and the adjusted basis of the property. §1001(b) defines the amount realized from the sale or other disposition of property as the sum of any money received plus the fair market value of other property received. The amount realized on a foreclosure or deed in lieu of foreclosure depends upon several factors, the most important of which are (1) whether the debt encumbering the property constitutes recourse or nonrecourse debt, and (2) the current fair market value of the property.
1. Nonrecourse Debt.
The amount realized upon the disposition of property subject to a nonrecourse debt will always be at least equal to the amount of the nonrecourse liability.2 Thus, if property subject to a nonrecourse debt is conveyed to the creditor, the debtor will recognize gain or loss equal to the difference between the amount of the liability discharged (plus the amount of cash and fair market value of any property paid to the debtor) and the debtor's adjusted tax basis in the property immediately before the disposition. No portion of the debtor's gain is treated as cancellation of indebtedness income ("COD"). Further, the property's fair market value is irrelevant to the transaction.
Example 1: (Assume the debt in this example is nonrecourse). Lou bought a house in 1975 for $75,000. In 1990, the house was worth $300,000 and Lou refinanced using the equity to pay off some credit card debt. In 1996, when the house is worth $140,000, the house is foreclosed at a time when the debt on the property is $240,000. Lou's basis in the house is $75,000, the amount paid. The amount realized on the sale is $240,000, the amount of the nonrecourse debt. Thus, Lou recognizes a gain of $165,000 on the foreclosure.
2. Recourse Debt.
If property subject to a recourse debt is conveyed to a creditor, the transaction is split into two parts3 consisting of (1) a taxable disposition of the property, and (2) to the extent the value of the property is less than the recourse liability, either a continuing debt obligation to the creditor or a discharge of the remainder of the liability. Under this approach, the taxpayer recognizes gain or loss equal to the difference between the fair market value of the property and the taxpayer's adjusted tax basis therein immediately prior to the disposition. If the remainder of the debt is forgiven, the amount forgiven will constitute COD income that, unless excepted under §108, will be included in the taxpayer's ordinary gross income.4
Example 2: (Assume the debt in this example is recourse). Louie bought a house in 1975 for $75,000. In 1990, the house was worth $300,000 and Louie refinanced using the equity to pay off some credit card debt. In 1996, when the house is worth $140,000, the house is foreclosed at a time when the debt on the property is $240,000. Louieie's basis in the house is $75,000, the amount paid. The amount realized on the sale is $140,000, the fair market value of the house. Thus, Louie recognizes a gain of $65,000 on the foreclosure. if the debt is also canceled, Louie would recognize $100,000 of COD income.
Example 3: (Assume the debt in this example is recourse). Louie bought a house in 1988 for $400,000. In 1997, the house is foreclosed at a time when the debt on the house is $375,000 and the fair market value is $300,000. Louie will suffer a loss on the foreclosure of $100,000 (amount realized is the fair market value of $300,000 minus the basis of $400,000). This loss is treated as a personal loss under rules disallowing losses from sale of personal residence. Additionally, Louie will realize $75,000 of COD income (the difference between the remaining debt and the fair market value). This is a situation where Louie wants the debt to be nonrecourse because Louie would have no COD income and a $25,000 personal loss.
3. Partially Recourse Debt.
If the debt is partially recourse, the Service takes the position that a transfer of the property to the creditor will be allocated first to the nonrecourse portion of the debt in the absence of an agreement to the contrary.5 Thus, if the value of the property transferred to the creditor is less than the nonrecourse portion of the debt, the amount realized by the debtor will equal the nonrecourse portion of the debt and the recourse portion will constitute COD under Treas. Reg. § 1.1001-2(c), Examples (7) and (8).
4. De Facto Nonrecourse Debt
Occasionally, a debt may be recourse on its face, but because of some other provision of law it becomes in fact nonrecourse. The most common example is an anti-deficiency statute. There is no clear guidance whether anti-deficiency statutes cause a recourse debt to become nonrecourse. In a 1991 private letter ruling dealing with Alaska law, the Service proclaimed that despite an anti-deficiency statute, a debt remained recourse for purpose of a foreclosure. This is just an informal opinion and is not binding on anyone. Arguably, all of the facts and circumstances should be considered in determining whether a debt is nonrecourse.
C. Gain From Foreclosure
Gain from a foreclosure is treated the same as gain from consentual sales of residences. If the sale occurred prior to May 6,1997, under Section 1034 the debtor could rollover some or all of the gain by purchasing another residence within two years. After May 6, under new Section 121, the debtor can exclude $250,000 of income from the sale of a residence from his gross income. A married debtor is entitled to a $500,000 exclusion. This exclusion is available every two years and repeals the prior rule that was a one-time exclusion $125,000 for taxpayers over 55. Generally, because of this new exclusion, a debtor is better off taking the position that the mortgage on his personal residence is nonrecourse. Generally, nonrecourse debt would result in a capital gain (that will be excludable) rather than COD income. Although the COD income may be excludable under Section 108, the taxpayer will have to make offsetting reductions in tax attributes including NOLs, capital losses, passive activity losses, and basis in assets. Prior to the enactment, taxpayers generally preferred COD income to capital gains when the taxpayer was in bankruptcy or insolvent.
D. COD Income
1. General Rule.
As a general rule, cancellation of indebtedness produces income equal to the amount of the debt canceled or forgiven.6 There are several exceptions to recognition of COD income that may apply in workouts involving real property indebtedness.
2. Exceptions.
a. Bankruptcy.
Cancellation of indebtedness of bankrupt taxpayers is excluded from income.7 Bankrupt taxpayers are those under the jurisdiction of the bankruptcy court where the discharge of indebtedness is either granted by the court or pursuant to a plan approved by the court.8
b. Insolvency.
Gross income does not include income from discharge of indebtedness of an insolvent taxpayer.9 The amount excludable from gross income by an insolvent taxpayer is limited to the amount by which the taxpayer is insolvent.10 A taxpayer is considered insolvent if the liabilities of the taxpayer immediately preceding the discharge of the debt exceed the fair market value of the taxpayer's assets.11 In Revenue Ruling 92-53,12 the Service stated that, in determining solvency it will ignore nonrecourse debt in excess of the value of the property securing that debt (except where that excess nonrecourse debt itself is being forgiven). In determining solvency, exempt assets under state law are not included in the taxpayer's assets.13
3. Attribute Reduction.
A taxpayer who excludes COD income from gross income due to the bankruptcy or insolvency exception is required to reduce other tax attributes by the amount of the excluded income. This reduction is done in the following order of priority:
(a) net operating losses and net operating loss carryovers;
(b) general business credits under Section 38;
(c) alternative minimum tax credits;
(d) net capital losses and capital loss carryovers;
(e) the basis of depreciable property (to the extent the basis exceeds remaining liabilities);
(f) passive activity losses and credit carryovers; and
(g) foreign tax credits and carryovers.14
The reduction in attributes occurs after the determination of tax for the year of the discharge.15 Attributes are reduced dollar-for-dollar, except for tax credits, which are reduced 33-1/3 cents for each dollar.16 A taxpayer may instead elect to first reduce the basis of depreciable property. The reduction in basis is limited to the taxpayer's adjusted basis of depreciable property held at the beginning of the taxable year following the taxable year in which the debt is discharged.17 (The reduction in basis is not limited to the excess of the basis in depreciable property over remaining liabilities.)18 Reductions in the basis of depreciable property are made in the following order of priority: (i) depreciable property for which the debt was incurred, (ii) other depreciable property securing the debt, and (iii) all remaining depreciable property.19
E. Foreclosure in Bankruptcy
The application of the foreclosure rules in bankruptcy is complicated by the creation of a separate tax estate for individuals in Chapter 7 and 11 (but not 13) under Section 1398. Generally, Section 1398 provides the following:
* A tax estate is created upon the filing of a Chapter 7 or 11 by an individual;
* The debtor's property is transferred tax-free to the estate;
* The debtor's attributes are transferred to the estate as of the first day of the debtor's tax year regardless of the date the petition is filed;
* The debtor may elect (the 1398(d)(2) election) to split his tax year into 2 years, a short year ending on the day before the petition was filed and a second year commencing on the date the petition was filed;
* Section 1398(c)(1) provides that the taxable income of the estate shall be computed in the same manner as for an individual. The tax shall be computed on such taxable income and shall be paid by the trustee;
* Income incurred during the pendency of the case is taxed to the estate and the estate is entitled to deductions for items paid (including the standard deduction) and for administration expenses;
* At the end of the case, the property and any unused attributes revert back to the debtor tax-free.
The consequences to the debtor and to the estate of a foreclosure depend on when the foreclosure occurs and whether the debtor makes a short-year election.
1. No Short Year Election/ Disposition Prior to filing Petition
If the transfer occurs prior to the bankruptcy and there is no short year election, courts have held that the tax liability is a post-petition nondischargeable debt as the income arises on the last day of the tax year (December 31) when the liability is deemed to occur under tax law.
2. Short Year Election/ Disposition Prior to filing Petition
If the transfer occurs prior to the bankruptcy and there is a short year election made, the liability becomes fixed on the last day of the tax year which in a short year is the day before filing the petition. Thus, it is a priority tax claim under Section 507(a)(8) that must be paid in full in a Chapter 11 or that survives a chapter 7 as a debt of the debtor if it is not paid out of assets of the estate.
Example 4: Alex has a capital loss carryover of $100,000 on January 1, 1997. Alex's house is foreclosed on March 15,1997 causing Alex to recognize a capital gain of $150,000. Alex files a Chapter 11 on June 1, 1997. Alex did not obtain any tax advice and neither did his attorney. Thus, Alex does not make a short year election. Alex is later surprised to learn (as is his attorney's malpractice carrier) that Alex has to pay tax on the $150,000 as a post-petition tax liability that becomes fixed on December 31, 1997. Further, Alex is very angry when he learns that he can't even use his $100,000 capital loss carryover to offset the gain because it was transferred to the bankruptcy estate on January 1, the first day of his tax year and later reduced when his debts were canceled. Alex becomes severely depressed when he learns that had the foreclosure taken place after May 6, 1997 he could have excluded all of the gain under new Section 121 or qualified for lower capital gains rates. Alex's new lawyer tells him that all is not lost, he could still rollover the gain by replacing the residence within two years of the sale and then sell the new residence which would qualify under Section 121. Alex begins searching for rich relatives or savvy venture capitalists to lend him money in spite of his foreclosure and bankruptcy.
The result of this example drastically changes if Alex had received competent advice from his attorney or tax advisor and made a short year election. In such case, Alex recognizes the $150,000 of income on May 31, 1997 (the last day o his tax year). The $100,000 capital loss carryover is fully used to offset all but $50,000 of the gain and it never gets lost in the estate. The tax on the $50,000 capital gain is a priority tax that must be paid in the Chapter 11 out of Alex's pre-petition assets.
3. Foreclosure During Bankruptcy and the "Chapter 18"
If the foreclosure occurs during the bankruptcy, the income from the sale is income of the estate and the tax liability is an administrative expense. In a Chapter 7, the tax must be paid first out of the assets of the estate. Often a trustee will abandon property with a built-in tax liability to the debtor under Bankruptcy Code Section 554(b). In such case, under the majority of the cases, the taxpayer gets the property back with the liability intact. If the property is foreclosed after the abandonment, the liability is the debtor's. See, In re McGowan, 95 B.R. 104 (N.D. Iowa 1988).
To avoid an independent trustee abandoning the property, some debtors file a Chapter 11 to avoid a trustee. As the debtor in possession they sale the property. In a Chapter 11, the tax must also be paid out of the assets of the estate. However, if the case is converted to a Chapter 7, the administrative tax is discharged. Thus, by disposing of the property in a Chapter 11 and converting to the Chapter 7 (the Chapter 18), an otherwise nondischargeable debt becomes discharged. Are there breach of fiduciary duty problems for a DIP who attempts the Chapter 18? Yes, if the transfer served no other useful purpose to the estate.
4. Trustee's Use of New Section 121 Exclusion
There is some uncertainty as to whether the trustee may use the Section 121 exclusion where the sale of the residence occurs during the bankruptcy. There are arguments for and against such use of the exclusion; the arguments for the ability to use the exclusion are more persuasive.
Arguments in favor of the exclusion include:
* Section 1398(c)(2) provides that the income of the estate shall be calculated in the same manner as an individual (provides that the estate is treated the same as an individual);
* Section 1398(d)(3) provides that the determination whether any amount paid or incurred by the estate is allowable as a deduction or credit id determined as if the debtor were still engaged in the activities the debtor was engaged in prior to bankruptcy (preserves personal residence status);
* The exclusion was granted to individuals by Congress as a public policy decision, it applies to anyone meeting the requirements. In consequence, it is not an attribute of the debtor that is personal in nature.
* Under former Section 121 (one-time exclusion for taxpayers over 55), Revenue Ruling 82-1, 1982-1 C.B. 26, a decedent's estate was permitted to use the exclusion. There is no justification in distinguishing a decedent's estate from a bankruptcy estate.
* If this exclusion provision is an attribute, what about Section 108's exclusion? Would that be an attribute such that the trustee's use of 108 to exclude COD income and reduce tax attributes may not be permitted?
A recent case held that the trustee could use new Section 121. See, In re Luciano Popa, 81 AFTR 2d ¶98-567 (BR ND ILL). Several older cases held that the previous Section 121 was not available to the trustee. See, In re Mehr, 153 BR 430 (D.N.J. 1992) and In re Barden, 205 B.R. 451 (ED NY 1996), affd, 105 F 3d 821 (2d Cir 1997).
II. Discharge Taxes in Bankruptcy
A. Income Taxes
1. Secured Taxes
* Make sure lien is properly perfected.
* Is there value supporting the lien? If so, the tax is secured and is nondischargeable. A secured tax must be paid in full. In a Chapter 11, the tax may be paid over any period of time permitted under the plan. In a Chapter 13, the tax must be paid in 3-5 years. In a Chapter 7, the tax is not discharged and survives the bankruptcy. After the Chapter 7 is completed, the IRS will attempt to collect out of the exempt assets (house, pension plans, cars, etc.). Generally, you can negotiate a release of the lien by calling IRS Special Procedures.
2. Priority Unsecured
* Priority taxes are not dischargeable in a Chapter 7. After the bankruptcy, they must be either paid under an installment agreement or disposed of in an offer - in - compromise. In a Chapter 13, the taxes must be paid in full over 3-5 years. In a Chapter 11, the priority tax must be paid in full in six years. As the debtor determines when to file the bankruptcy petition, the debtor should be able to plan to avoid the priority status. If the debtor miscalculates and files too soon, the debtor may not voluntarily dismiss the petition and refile after the period has expired. See, In re Leach, 130 BR 855 (BAP 9, 1991).
* Three-year Rule. Generally, a tax is a priority tax if the return was due within three years of the date the bankruptcy petition is filed. See, Bankruptcy Code §507(a)(8)(a)(i). For example, 1997 taxes are due on April 15, 1998. Thus, any liability for 1997 taxes (assuming no extension) would become dischargeable on April 16, 2001. Additionally, if April 15 falls on a weekend, the return would actually be due on April 16 or 17, 1998. In such case, the tax would not be dischargeable until April 17 or 18, 2001. To be safe, wait several days after the due date to avoid this problem. To calculate the date a return is due, include extensions. The important date is the due date, not the date the return was actually filed.
* 240-day Rule. Generally, a tax is a priority tax if it is assessed within 240 days of the filing of the bankruptcy petition. Additionally, the 240-day period is tolled while an offer-in-compromise is outstanding plus 30 days. See, Bankruptcy Code §507(a)(8)(a)(ii). The 240-day period is not tolled for installment agreements. If there are multiple assessments, each assessment starts a new 240-day period. Assessment dates are determined for federal taxes under the assessment provisions of the Internal Revenue Code. To accurately determine the assessment date, you must obtain a record of account for the debtor. For state taxes, state tax law determines the assessment date. In California, a tax is assessed 60 days after the issuance of Notice of Proposed Additional Tax. See, In re King, 122 BR 383 (BAP 9, 1991), aff'd, 961 F2d 1423 (CA 9 1992). An offer-in-compromise must be made during the 240-day period to toll the period. Thus, offers made prior to the assessment or after the 240-day period do not toll the period. See, In re Aberl, 78 F3d 241 (CA 6 1996).
* Not assessed, but assessable. Any tax that has not been assessed at the time the bankruptcy petition was filed but was assessable is a priority tax. This rule does not include nonfiled returns, late filed returns, or fraudulent returns. Generally, this rule would apply where an assessment could be made under an extended statute of limitations such as based upon a substantial understatement of tax .
3. Non-priority Unsecured
Taxes that are not secured and that are not priority are dischargeable in a Chapter 7,11, and 13.
4. Non-filers
Bankruptcy Code §523(a)(1)(B)(i) provides that tax debts for which no tax return was filed are not dischargeable in a Chapter 7 or 11. Note that these taxes may be discharged under the superdischarge provisions of Chapter 13. This rule is one of the most difficult as there is no definition of what constitutes a "return". Most of the difficult revolve around the IRS filing a substitute return for the debtor. In such cases, the courts have generally found that the debtor failed to file a return. On some occasions, if the taxpayer cooperated with the IRS and signed Form 870, the debtor has been treated as filing the return. See, In re Carapella, 84 BR 779 (MD FLA 1988). It is not clear whether a subsequent amended return will be treated as a return. See, In re Arenson, 145 BR 310 (D. Neb 1992).
5. Late Filers
A tax is not dischargeable in a Chapter 7 or 11 if it is filed late and within two years of the date the bankruptcy petition is filed. See Bankruptcy Code §523(a)(1)(B)(ii). Note that these taxes may be discharged under the superdischarge provisions of Chapter 13.
6. Fraud
A tax is not dischargeable in a Chapter 7 or 11 if it where it is related to a fraudulent return or where the debtor willfully attempted to evade or defeat the tax. See Bankruptcy Code §523(a)(1)(C). Note that these taxes may be discharged under the superdischarge provisions of Chapter 13.
7. Piggyback State Tax Assessments
Currently being debated in California and many other states. Where debtor is required to file a state return after a federal audit and fails to file the return, tax may not be dischargeable under Bankruptcy Code §523(a)(1)(B)(i). Note that these taxes may be discharged under the superdischarge provisions of Chapter 13.
8. Amended Returns
Cases are all over the board! Sometimes an amended return is a treated as a return. Sometimes it is treated as not a return. Generally, most cases go against the debtor. For example, if the amended return would cause a new 3 year waiting period making a tax a priority tax, courts have held that the amended return is a return. However, in some cases where the IRS has filed a substitute return and the debtor files an amended return in response, some courts have held that the amended return is not a return and thus, no return has been filed.
B. Employment Taxes
1. General Rule
Employment taxes imposed on the employer are dischargeable if the return was due (including extensions) more than three years before the bankruptcy petition is filed. See, Bankruptcy Code §507(a)(8)(D).
2. 940 FUTA Liabilities
Dischargeable if meet the three year rule.
3. 941 FICA and Income Tax Withholding
Portion of 941 FICA that is imposed upon employer is dischargeable under the three year rule. Portion that is imposed on employee and withheld by employer is a trust fund tax that is not dischargeable. Income tax withheld is a trust fund obligation that is not dischargeable.
4. Entity Issues.
a. Corporations
The corporation is the employer. Thus, the shareholders, directors and officers are not liable for these taxes unless personally assessed as responsible person. Can only be assessed for trust fund portion.
b. Partnerships
The partnership is the employer, not the partners. Employment taxes are merely a general obligation of the partner that may be discharged in the partner's bankruptcy (unless the partner is a responsible person).
C. State Taxes
1. Income
There are no differences in federal and state income taxes. See general rules above.
2. Sales
In California, the sales tax is imposed upon the seller, not the purchaser. Thus, it is not a trust fund tax. Several cases have held that it is a gross receipts tax that is dischargeable under the same rules as the income tax.
3. Property
Property taxes that are assessed and payable without a penalty more than one year before the date of the filing of the bankruptcy petition are dischargeable under Bankruptcy Code § 507(a)(8)(B).
D. Possible Candidates for Chapter 13
* Nonfilers
* Latefilers
* Fraud
* Secured Taxes
* Priority Taxes
E. The "Chapter 20"
Often a debtor will have too much unsecured debt to file a Chapter 13. In such cases, the debtor may choose to file a Chapter 7 to get rid of dischargeable unsecured debt and then file a Chapter 13 to repay the remaining debt (generally secured taxes or priority taxes). In many cases, the taxes may be paid in a Chapter 13 with no less interest and no penalties.
III. Advanced COD Issues
A. Do You Really Have COD Income?
The following events do not generally result in COD income:
* Cancellation of contingent or contested debt
* Cancellation of a guarantee
* Cancellation of partnership debt owed to a partner
Treated as a capital contribution
* Cancellation of corporate debt owed to shareholder
Treated as contribution to capital
But see §108(e)(6)
* Cancellation of debt owed by partner to partnership
Treated as distribution
* Cancellation of debt owed by shareholder to corporation
Treated as distribution
* Cancellation of employee's debt by employer
Treated as compensation
* Foreclosure or deed-in-lieu of foreclosure
See discussion above
B. Events Causing COD Income
* Cancellation of debt not listed above.
* A corporation repurchases its debentures at less than face amount, regardless of whether the debenture is retired.
* A related party purchases a debt from an unrelated party under Section 108(e)(4)
Attribution rules apply (Section 267 and Section 707(b)).
* Certain debt modifications - A modification is any alteration of a legal right or obligation. A modification is material if it is significant under Treas. Reg. §1.1001-3. A material modification of a debt instrument results in a deemed exchange of the debt instrument.
* Exchange of one debt instrument for another (either physical exchange or deemed exchange when debt is materially modified).
Must compare issue prices of the old and new debt instruments under §108(e)(10).
Issue price is determined under the OID rules §§1273-1274.
* Running of Statute of Limitations - See the§6050P Regulations.
1 See Helvering v. Hammel, 311 U.S. 504 (1941); Tres. Reg. § 1.1001-2(a)(1).return to text
2 See Commissioner v. Tufts, 461 U.S. 300 (1983); Crane v. Commissioner, 331 U.S. 1 (1947).return to text
3 See Bressi v. Commissioner, 62 T.C.M. 1668 (1991); Treas. Reg. §§ 1.1001-2(a)(2), 1.1001-2(c), Example (8).return to text
4 Some cases have not followed the bifurcation approach of the regulations. See Chilingirian v. Commissioner, 52 T.C.M. 606 (1986), aff'd, 90-2 U.S.T.C. ¶ 50569 (6th Cir. 1990); Aizawa v. Commissioner, 99 T.C. 197 (1992). The Internal Revenue Service (the "Service") has taken the position that a disposition of property secured by a recourse liability must be analyzed in accordance with the bifurcation method of the regulations. Rev. Rul. 90-16, 1990-1 C.B.12; G.C.M. 39814 (March 30, 1990); T.A.M. 8504010 (October 26, 1985).return to text
5 See Tech. Adv. Mem. 8348001 (August 18, 1983).return to text
6 Section 61(a)(12).return to text
7 Section 108(a)(1)(A).return to text
8 Section 108(d)(2).return to text
9 Section 108(a)(1)(B).return to text
10 Section 108(a)(3).return to text
11 Section 108(d)(3).return to text
12 1992-2 C.B. 48.return to text
13 See Hunt v. Comm'r, 57 TCM 919 (1989); PLR 9125010 (March 19, 1991); PLR 9130005 (March 29, 1991); PLR 8920019 (February 14, 1989). return to text
14 Section 108(b)(2).return to text
15 SecTion 108(b)(4)(A).return to text
16 Section 108(b)(3).return to text
17 Section 108(b)(5).return to text
18 Section 1017(b)(2).return to text
19 Treas. Reg. §1.1017-1(a).return to text
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Last updated May 23, 1998