International tax aspects of cancellation of indebtedness income

With companies worldwide defaulting on a record $181.7 billion in debt last year, a taxpayer's ability to exclude cancellation of indebtedness income has become increasingly significant. Under Section 108, a taxpayer whose income is subject to US federal income tax is able to exclude COD income...

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Bibliographic Details
Published in:Journal of Taxation 2003-06, Vol.98 (6), p.365
Main Authors: Rubinger, Jeffrey L, Mayo, Daniel
Format: Article
Language:English
Subjects:
American dollar
C corporations
Capital losses
Currency
Debt
Debt cancellation
Federal court decisions
Foreign source income
Foreign tax credits
Income taxes
Insolvency
Internal Revenue Code
Passive activity
Section 108
Situs
Stockholders
Tax rates
Taxable income
Taxation
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Summary:With companies worldwide defaulting on a record $181.7 billion in debt last year, a taxpayer's ability to exclude cancellation of indebtedness income has become increasingly significant. Under Section 108, a taxpayer whose income is subject to US federal income tax is able to exclude COD income in certain situations. The price of this exclusion is the requirement that the taxpayer reduce specified "tax attributes" in an amount generally equal to the income excluded. While the operation of these rules is relatively straightforward in a purely domestic setting, their application is less clear when one of the parties to the cancelled debt is a foreign person. Some issues that may arise when one of the parties to a cancelled debt is a foreign person are examined in this article.
ISSN:0022-4863