Discussion Archives:Cancellation of Debt Assumed by S-Corp Shareholder

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Discussion Forum Index --> Advanced Tax Questions --> Cancellation of Debt Assumed by S-Corp Shareholder


Discussion Forum Index --> Tax Questions --> Cancellation of Debt Assumed by S-Corp Shareholder

JBinSC (talk|edits) said:

12 February 2010
Sadly, yet another one of my clients is going out of business. It was a small retail clothing store that closed its doors on 12-31-2009 with substantial credit card debt. The debt was assumed by the 2 S-corp shareholders and has subsequently been renegotiated and reduced. The shareholders will receive 1099-C for the amounts cancelled. Because of the FMV of primary residences that they cannot sell or borrow against, they probably cannot be considered insolvent.

Do they have any relief under 108(i)? I believe this qualifies as business debt, but all of the assets of the business are gone.

If not 108(i), then is there any relief?

Thanks

JBinSC (talk|edits) said:

2 March 2010
So has noone else had a client ask them about deferring COD income until 2015 ?

I seemed like my job was a heck of a lot easier when everyone was making money.

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