Real Estate: Understanding the Tax Consequences of COD Income Deferral
10/04/2011
Income from the cancellation of debt, or “COD,” is generally taxable and debts discharged while a taxpayer is in bankruptcy proceedings or while insolvent may be excluded from income. The American Recovery and Reinvestment Act of 2009, however, introduced an amendment that allows qualifying taxpayers to elect to defer COD income resulting from certain debt workouts during 2009 or 2010, ratably, over a five-year period beginning in 2014.
Click here to learn more about how to properly account for the tax consequences of the deferral of COD income; the distinction between recourse and non-recourse debt and why it’s important to understand the difference; and certain exclusions and limitations that may apply depending on debt classification.
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