Internal Revenue Code:Sec. 108. Income from discharge of indebtedness
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
Statute
Sec. 108. Income from discharge of indebtedness
(a) Exclusion from gross income
(1) In general
Gross income does not include any amount which (but for this
subsection) would be includible in gross income by reason of the
discharge (in whole or in part) of indebtedness of the taxpayer
if -
(A) the discharge occurs in a title 11 case,
(B) the discharge occurs when the taxpayer is insolvent,
(C) the indebtedness discharged is qualified farm
indebtedness, or
(D) in the case of a taxpayer other than a C corporation, the
indebtedness discharged is qualified real property business
indebtedness.
(2) Coordination of exclusions
(A) Title 11 exclusion takes precedence
Subparagraphs (B), (C), and (D) of paragraph (1) shall not
apply to a discharge which occurs in a title 11 case.
(B) Insolvency exclusion takes precedence over qualified farm
exclusion and qualified real property business exclusion
Subparagraphs (C) and (D) of paragraph (1) shall not apply to
a discharge to the extent the taxpayer is insolvent.
(3) Insolvency exclusion limited to amount of insolvency
In the case of a discharge to which paragraph (1)(B) applies,
the amount excluded under paragraph (1)(B) shall not exceed the
amount by which the taxpayer is insolvent.
(b) Reduction of tax attributes
(1) In general
The amount excluded from gross income under subparagraph (A),
(B), or (C) of subsection (a)(1) shall be applied to reduce the
tax attributes of the taxpayer as provided in paragraph (2).
(2) Tax attributes affected; order of reduction
Except as provided in paragraph (5), the reduction referred to
in paragraph (1) shall be made in the following tax attributes in
the following order:
(A) NOL
Any net operating loss for the taxable year of the discharge,
and any net operating loss carryover to such taxable year.
(B) General business credit
Any carryover to or from the taxable year of a discharge of
an amount for purposes for determining the amount allowable as
a credit under section 38 (relating to general business
credit).
(C) Minimum tax credit
The amount of the minimum tax credit available under section
53(b) as of the beginning of the taxable year immediately
following the taxable year of the discharge.
(D) Capital loss carryovers
Any net capital loss for the taxable year of the discharge,
and any capital loss carryover to such taxable year under
section 1212.
(E) Basis reduction
(i) In general
The basis of the property of the taxpayer.
(ii) Cross reference
For provisions for making the reduction described in clause
(i), see section 1017.
(F) Passive activity loss and credit carryovers
Any passive activity loss or credit carryover of the taxpayer
under section 469(b) from the taxable year of the discharge.
(G) Foreign tax credit carryovers
Any carryover to or from the taxable year of the discharge
for purposes of determining the amount of the credit allowable
under section 27.
(3) Amount of reduction
(A) In general
Except as provided in subparagraph (B), the reductions
described in paragraph (2) shall be one dollar for each dollar
excluded by subsection (a).
(B) Credit carryover reduction
The reductions described in subparagraphs (B), (C), and (G)
shall be 33 1/3 cents for each dollar excluded by subsection
(a). The reduction described in subparagraph (F) in any passive
activity credit carryover shall be 33 1/3 cents for each dollar
excluded by subsection (a).
(4) Ordering rules
(A) Reductions made after determination of tax for year
The reductions described in paragraph (2) shall be made after
the determination of the tax imposed by this chapter for the
taxable year of the discharge.
(B) Reductions under subparagraph (A) or (D) of paragraph (2)
The reductions described in subparagraph (A) or (D) of
paragraph (2) (as the case may be) shall be made first in the
loss for the taxable year of the discharge and then in the
carryovers to such taxable year in the order of the taxable
years from which each such carryover arose.
(C) Reductions under subparagraphs (B) and (G) of paragraph (2)
The reductions described in subparagraphs (B) and (G) of
paragraph (2) shall be made in the order in which carryovers
are taken into account under this chapter for the taxable year
of the discharge.
(5) Election to apply reduction first against depreciable
property
(A) In general
The taxpayer may elect to apply any portion of the reduction
referred to in paragraph (1) to the reduction under section
1017 of the basis of the depreciable property of the taxpayer.
(B) Limitation
The amount to which an election under subparagraph (A)
applies shall not exceed the aggregate adjusted bases of the
depreciable property held by the taxpayer as of the beginning
of the taxable year following the taxable year in which the
discharge occurs.
(C) Other tax attributes not reduced
Paragraph (2) shall not apply to any amount to which an
election under this paragraph applies.
(c) Treatment of discharge of qualified real property business
indebtedness
(1) Basis reduction
(A) In general
The amount excluded from gross income under subparagraph (D)
of subsection (a)(1) shall be applied to reduce the basis of
the depreciable real property of the taxpayer.
(B) Cross reference
For provisions making the reduction described in subparagraph
(A), see section 1017.
(2) Limitations
(A) Indebtedness in excess of value
The amount excluded under subparagraph (D) of subsection
(a)(1) with respect to any qualified real property business
indebtedness shall not exceed the excess (if any) of -
(i) the outstanding principal amount of such indebtedness
(immediately before the discharge), over
(ii) the fair market value of the real property described
in paragraph (3)(A) (as of such time), reduced by the
outstanding principal amount of any other qualified real
property business indebtedness secured by such property (as
of such time).
(B) Overall limitation
The amount excluded under subparagraph (D) of subsection
(a)(1) shall not exceed the aggregate adjusted bases of
depreciable real property (determined after any reductions
under subsections (b) and (g)) held by the taxpayer immediately
before the discharge (other than depreciable real property
acquired in contemplation of such discharge).
(3) Qualified real property business indebtedness
The term ''qualified real property business indebtedness''
means indebtedness which -
(A) was incurred or assumed by the taxpayer in connection
with real property used in a trade or business and is secured
by such real property,
(B) was incurred or assumed before January 1, 1993, or if
incurred or assumed on or after such date, is qualified
acquisition indebtedness, and
(C) with respect to which such taxpayer makes an election to
have this paragraph apply.
Such term shall not include qualified farm indebtedness.
Indebtedness under subparagraph (B) shall include indebtedness
resulting from the refinancing of indebtedness under subparagraph
(B) (or this sentence), but only to the extent it does not exceed
the amount of the indebtedness being refinanced.
(4) Qualified acquisition indebtedness
For purposes of paragraph (3)(B), the term ''qualified
acquisition indebtedness'' means, with respect to any real
property described in paragraph (3)(A), indebtedness incurred or
assumed to acquire, construct, reconstruct, or substantially
improve such property.
(5) Regulations
The Secretary shall issue such regulations as are necessary to
carry out this subsection, including regulations preventing the
abuse of this subsection through cross-collateralization or other
means.
(d) Meaning of terms; special rules relating to certain provisions
(1) Indebtedness of taxpayer
For purposes of this section, the term ''indebtedness of the
taxpayer'' means any indebtedness -
(A) for which the taxpayer is liable, or
(B) subject to which the taxpayer holds property.
(2) Title 11 case
For purposes of this section, the term ''title 11 case'' means
a case under title 11 of the United States Code (relating to
bankruptcy), but only if the taxpayer is under the jurisdiction
of the court in such case and the discharge of indebtedness is
granted by the court or is pursuant to a plan approved by the
court.
(3) Insolvent
For purposes of this section, the term ''insolvent'' means the
excess of liabilities over the fair market value of assets. With
respect to any discharge, whether or not the taxpayer is
insolvent, and the amount by which the taxpayer is insolvent,
shall be determined on the basis of the taxpayer's assets and
liabilities immediately before the discharge.
((4) Repealed. Pub. L. 99-514, title VIII, Sec. 822(b)(3)(A),
Oct. 22, 1986, 100 Stat. 2373)
(5) Depreciable property
The term ''depreciable property'' has the same meaning as when
used in section 1017.
(6) Certain provisions to be applied at partner level
In the case of a partnership, subsections (a), (b), (c), and
(g) shall be applied at the partner level.
(7) Special rules for S corporation
(A) Certain provisions to be applied at corporate level
In the case of an S corporation, subsections (a), (b), (c),
and (g) shall be applied at the corporate level, including by not
taking into account under section 1366(a) any amount excluded under
subsection (a) of this section.
[<<NOTE: Applicability.>> In general.--Except as
provided in paragraph (2), the amendment made to this section
by P.L. 107-147 shall apply to discharges of indebtedness after
October 11, 2001, in taxable years ending after such date.
Exception.--The amendment made to this section shall not
apply to any discharge of indebtedness before March 1, 2002,
pursuant to a plan of reorganization filed with a bankruptcy
court on or before October 11, 2001.]
(B) Reduction in carryover of disallowed losses and deductions
In the case of an S corporation, for purposes of subparagraph
(A) of subsection (b)(2), any loss or deduction which is
disallowed for the taxable year of the discharge under section
1366(d)(1) shall be treated as a net operating loss for such
taxable year. The preceding sentence shall not apply to any
discharge to the extent that subsection (a)(1)(D) applies to
such discharge.
(C) Coordination with basis adjustments under section
1367(b)(2)
For purposes of subsection (e)(6), a shareholder's adjusted
basis in indebtedness of an S corporation shall be determined
without regard to any adjustments made under section
1367(b)(2).
(8) Reductions of tax attributes in title 11 cases of individuals
to be made by estate
In any case under chapter 7 or 11 of title 11 of the United
States Code to which section 1398 applies, for purposes of
paragraphs (1) and (5) of subsection (b) the estate (and not the
individual) shall be treated as the taxpayer. The preceding
sentence shall not apply for purposes of applying section 1017 to
property transferred by the estate to the individual.
(9) Time for making election, etc.
(A) Time
An election under paragraph (5) of subsection (b) or under
paragraph (3)(C) of subsection (c) shall be made on the
taxpayer's return for the taxable year in which the discharge
occurs or at such other time as may be permitted in regulations
prescribed by the Secretary.
(B) Revocation only with consent
An election referred to in subparagraph (A), once made, may
be revoked only with the consent of the Secretary.
(C) Manner
An election referred to in subparagraph (A) shall be made in
such manner as the Secretary may by regulations prescribe.
(10) Cross reference
For provision that no reduction is to be made in the basis of
exempt property of an individual debtor, see section
1017(c)(1).
(e) General rules for discharge of indebtedness (including
discharges not in title 11 cases or insolvency)
For purposes of this title -
(1) No other insolvency exception
Except as otherwise provided in this section, there shall be no
insolvency exception from the general rule that gross income
includes income from the discharge of indebtedness.
(2) Income not realized to extent of lost deductions
No income shall be realized from the discharge of indebtedness
to the extent that payment of the liability would have given rise
to a deduction.
(3) Adjustments for unamortized premium and discount
The amount taken into account with respect to any discharge
shall be properly adjusted for unamortized premium and
unamortized discount with respect to the indebtedness discharged.
(4) Acquisition of indebtedness by person related to debtor
(A) Treated as acquisition by debtor
For purposes of determining income of the debtor from
discharge of indebtedness, to the extent provided in
regulations prescribed by the Secretary, the acquisition of
outstanding indebtedness by a person bearing a relationship to
the debtor specified in section 267(b) or 707(b)(1) from a
person who does not bear such a relationship to the debtor
shall be treated as the acquisition of such indebtedness by the
debtor. Such regulations shall provide for such adjustments in
the treatment of any subsequent transactions involving the
indebtedness as may be appropriate by reason of the application
of the preceding sentence.
(B) Members of family
For purposes of this paragraph, sections 267(b) and 707(b)(1)
shall be applied as if section 267(c)(4) provided that the
family of an individual consists of the individual's spouse,
the individual's children, grandchildren, and parents, and any
spouse of the individual's children or grandchildren.
(C) Entities under common control treated as related
For purposes of this paragraph, two entities which are
treated as a single employer under subsection (b) or (c) of
section 414 shall be treated as bearing a relationship to each
other which is described in section 267(b).
(5) Purchase-money debt reduction for solvent debtor treated as
price reduction
If -
(A) the debt of a purchaser of property to the seller of such
property which arose out of the purchase of such property is
reduced,
(B) such reduction does not occur -
(i) in a title 11 case, or
(ii) when the purchaser is insolvent, and
(C) but for this paragraph, such reduction would be treated
as income to the purchaser from the discharge of indebtedness,
then such reduction shall be treated as a purchase price
adjustment.
(6) Indebtedness contributed to capital
Except as provided in regulations, for purposes of determining
income of the debtor from discharge of indebtedness, if a debtor
corporation acquires its indebtedness from a shareholder as a
contribution to capital -
(A) section 118 shall not apply, but
(B) such corporation shall be treated as having satisfied the
indebtedness with an amount of money equal to the shareholder's
adjusted basis in the indebtedness.
(7) Recapture of gain on subsequent sale of stock
(A) In general
If a creditor acquires stock of a debtor corporation in
satisfaction of such corporation's indebtedness, for purposes
of section 1245 -
(i) such stock (and any other property the basis of which
is determined in whole or in part by reference to the
adjusted basis of such stock) shall be treated as section
1245 property,
(ii) the aggregate amount allowed to the creditor -
(I) as deductions under subsection (a) or (b) of section
166 (by reason of the worthlessness or partial
worthlessness of the indebtedness), or
(II) as an ordinary loss on the exchange,
shall be treated as an amount allowed as a deduction for
depreciation, and
(iii) an exchange of such stock qualifying under section
354(a), 355(a), or 356(a) shall be treated as an exchange to
which section 1245(b)(3) applies.
The amount determined under clause (ii) shall be reduced by the
amount (if any) included in the creditor's gross income on the
exchange.
(B) Special rule for cash basis taxpayers
In the case of any creditor who computes his taxable income
under the cash receipts and disbursements method, proper
adjustment shall be made in the amount taken into account under
clause (ii) of subparagraph (A) for any amount which was not
included in the creditor's gross income but which would have
been included in such gross income if such indebtedness had
been satisfied in full.
(C) Stock of parent corporation
For purposes of this paragraph, stock of a corporation in
control (within the meaning of section 368(c)) of the debtor
corporation shall be treated as stock of the debtor
corporation.
(D) Treatment of successor corporation
For purposes of this paragraph, the term ''debtor
corporation'' includes a successor corporation.
(E) Partnership rule
Under regulations prescribed by the Secretary, rules similar
to the rules of the foregoing subparagraphs of this paragraph
shall apply with respect to the indebtedness of a partnership.
(8) Indebtedness satisfied by corporate stock or
partnership interest.--For purposes of determining income of a
debtor from discharge of indebtedness, if--
(A) a debtor corporation transfers stock, or
(B) a debtor partnership transfers a capital or
profits interest in such partnership,
to a creditor in satisfaction of its recourse or nonrecourse
indebtedness, such corporation or partnership shall be treated
as having satisfied the indebtedness with an amount of money
equal to the fair market value of the stock or interest. In the
case of any partnership, any discharge of indebtedness income
recognized under this paragraph shall be included in the
distributive shares of taxpayers which were the partners in the
partnership immediately before such discharge.
(9) Discharge of indebtedness income not taken into account in
determining whether entity meets REIT qualifications
Any amount included in gross income by reason of the discharge
of indebtedness shall not be taken into account for purposes of
paragraphs (2) and (3) of section 856(c).
(10) Indebtedness satisfied by issuance of debt instrument
(A) In general
For purposes of determining income of a debtor from discharge
of indebtedness, if a debtor issues a debt instrument in
satisfaction of indebtedness, such debtor shall be treated as
having satisfied the indebtedness with an amount of money equal
to the issue price of such debt instrument.
(B) Issue price
For purposes of subparagraph (A), the issue price of any debt
instrument shall be determined under sections 1273 and 1274.
For purposes of the preceding sentence, section 1273(b)(4)
shall be applied by reducing the stated redemption price of any
instrument by the portion of such stated redemption price which
is treated as interest for purposes of this chapter.
(f) Student loans
(1) In general
In the case of an individual, gross income does not include any
amount which (but for this subsection) would be includible in
gross income by reason of the discharge (in whole or in part) of
any student loan if such discharge was pursuant to a provision of
such loan under which all or part of the indebtedness of the
individual would be discharged if the individual worked for a
certain period of time in certain professions for any of a broad
class of employers.
(2) Student loan
For purposes of this subsection, the term ''student loan''
means any loan to an individual to assist the individual in
attending an educational organization described in section
170(b)(1)(A)(ii) made by -
(A) the United States, or an instrumentality or agency
thereof,
(B) a State, territory, or possession of the United States,
or the District of Columbia, or any political subdivision
thereof,
(C) a public benefit corporation -
(i) which is exempt from taxation under section 501(c)(3),
(ii) which has assumed control over a State, county, or
municipal hospital, and
(iii) whose employees have been deemed to be public
employees under State law, or
(D) any educational organization described in section
170(b)(1)(A)(ii) if such loan is made -
(i) pursuant to an agreement with any entity described in
subparagraph (A), (B), or (C) under which the funds from
which the loan was made were provided to such educational
organization, or
(ii) pursuant to a program of such educational organization
which is designed to encourage its students to serve in
occupations with unmet needs or in areas with unmet needs and
under which the services provided by the students (or former
students) are for or under the direction of a governmental
unit or an organization described in section 501(c)(3) and
exempt from tax under section 501(a).
The term ''student loan'' includes any loan made by an
educational organization described in section 170(b)(1)(A)(ii) or
by an organization exempt from tax under section 501(a) to
refinance a loan to an individual to assist the individual in
attending any such educational organization but only if the
refinancing loan is pursuant to a program of the refinancing
organization which is designed as described in subparagraph
(D)(ii).
(3) Exception for discharges on account of services performed for
certain lenders
Paragraph (1) shall not apply to the discharge of a loan made
by an organization described in paragraph (2)(D) if the discharge
is on account of services performed for either such organization.
(4) Payments under national health service corps loan
repayment program and certain state loan repayment programs.--In
the case of an individual, gross income shall not include any
amount received under section 338B(g) of the Public Health
Service Act or under a State program described in section 338I
of such Act.
(g) Special rules for discharge of qualified farm indebtedness
(1) Discharge must be by qualified person
(A) In general
Subparagraph (C) of subsection (a)(1) shall apply only if the
discharge is by a qualified person.
(B) Qualified person
For purposes of subparagraph (A), the term ''qualified
person'' has the meaning given to such term by section
49(a)(1)(D)(iv); except that such term shall include any
Federal, State, or local government or agency or
instrumentality thereof.
(2) Qualified farm indebtedness
For purposes of this section, indebtedness of a taxpayer shall
be treated as qualified farm indebtedness if -
(A) such indebtedness was incurred directly in connection
with the operation by the taxpayer of the trade or business of
farming, and
(B) 50 percent or more of the aggregate gross receipts of the
taxpayer for the 3 taxable years preceding the taxable year in
which the discharge of such indebtedness occurs is attributable
to the trade or business of farming.
(3) Amount excluded cannot exceed sum of tax attributes and
business and investment assets
(A) In general
The amount excluded under subparagraph (C) of subsection
(a)(1) shall not exceed the sum of -
(i) the adjusted tax attributes of the taxpayer, and
(ii) the aggregate adjusted bases of qualified property
held by the taxpayer as of the beginning of the taxable year
following the taxable year in which the discharge occurs.
(B) Adjusted tax attributes
For purposes of subparagraph (A), the term ''adjusted tax
attributes'' means the sum of the tax attributes described in
subparagraphs (A), (B), (C), (D), (F), and (G) of subsection
(b)(2) determined by taking into account $3 for each $1 of the
attributes described in subparagraphs (B), (C), and (G) of
subsection (b)(2) and the attribute described in subparagraph
(F) of subsection (b)(2) to the extent attributable to any
passive activity credit carryover.
(C) Qualified property
For purposes of this paragraph, the term ''qualified
property'' means any property which is used or is held for use
in a trade or business or for the production of income.
(D) Coordination with insolvency exclusion
For purposes of this paragraph, the adjusted basis of any
qualified property and the amount of the adjusted tax
attributes shall be determined after any reduction under
subsection (b) by reason of amounts excluded from gross income
under subsection (a)(1)(B).
Sources
(Aug. 16, 1954, ch. 736, 68A Stat. 32; June 29, 1956, ch. 463, Sec.
5, 70 Stat. 403; Pub. L. 88-496, Sec. 1(a), June 8, 1960, 74 Stat.
164; Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A), 1951(b)(2)(A),
Oct. 4, 1976, 90 Stat. 1834, 1836; Pub. L. 96-589, Sec. 2(a), Dec.
24, 1980, 94 Stat. 3389; Pub. L. 97-354, Sec. 3(e), Oct. 19, 1982,
96 Stat. 1689; Pub. L. 97-448, title I, Sec. 102(h)(1), title III,
Sec. 304(d), Jan. 12, 1983, 96 Stat. 2372, 2398; Pub. L. 98-369,
div. A, title I, Sec. 59(a), (b)(1), title IV, Sec. 474(r)(5),
title VII, Sec. 721(b)(2), title X, Sec. 1076(a), July 18, 1984, 98
Stat. 576, 839, 966, 1053; Pub. L. 99-514, title I, Sec. 104(b)(2),
title II, Sec. 231(d)(3)(D), title IV, Sec. 405(a), title VI, Sec.
621(e)(1), title VIII, Sec. 805(c)(2)-(4), 822(a), (b)(1)-(3),
title XI, Sec. 1171(b)(4), title XVIII, Sec. 1847(b)(7), Oct. 22,
1986, 100 Stat. 2105, 2179, 2224, 2266, 2362, 2373, 2513, 2856;
Pub. L. 100-647, title I, Sec. 1004(a)(1)-(4), (6), Nov. 10, 1988,
102 Stat. 3385, 3387; Pub. L. 101-508, title XI, Sec. 11325(a)(1),
(b), 11813(b)(6), Nov. 5, 1990, 104 Stat. 1388-466, 1388-551; Pub.
L. 103-66, title XIII, Sec. 13150(a)-(c)(5), 13226(a)(1), (2)(B),
(b)(1)-(3), Aug. 10, 1993, 107 Stat. 446-448, 487, 488; Pub. L.
104-188, title I, Sec. 1703(n)(2), Aug. 20, 1996, 110 Stat. 1877;
Pub. L. 105-34, title II, Sec. 225(a), Aug. 5, 1997, 111 Stat. 820;
Pub. L. 105-206, title VI, Sec. 6004(f), July 22, 1998, 112 Stat.
795.)
Miscellaneous
AMENDMENTS
2005 - P.L. 109-73
SEC. 401. EXCLUSIONS OF CERTAIN CANCELLATIONS OF INDEBTEDNESS BY REASON
OF HURRICANE KATRINA.
(a) In General.--For purposes of the Internal Revenue Code of 1986,
gross income shall not include any amount which (but for this section)
would be includible in gross income by reason of the discharge (in whole
or in part) of indebtedness of a natural person described in subsection
(b) by an applicable entity (as defined in section 6050P(c)(1) of such
Code).
(b) Persons Described.--A natural person is described in this
subsection if the principal place of abode of such person on August 25,
2005, was located--
(1) in the core disaster area, or
(2) in the Hurricane Katrina disaster area (but outside the
core disaster area) and such person suffered economic loss by
reason of Hurricane Katrina.
(c) Exceptions.--
(1) Business indebtedness.--Subsection (a) shall not apply
to any indebtedness incurred in connection with a trade or
business.
(2) Real property outside core disaster area.--Subsection
(a) shall not apply to any discharge of indebtedness to the
extent that real property constituting security for such
indebtedness is located outside of the Hurricane Katrina
disaster area.
(d) Denial of Double Benefit.--For purposes of the Internal Revenue
Code of 1986, the amount excluded from gross income under subsection (a)
shall be treated in the same manner as an amount excluded under section
108(a) of such Code.
2004 - Subsec.896(a),Pub.L.108-357, amended Sec.108-357(e)
by amending paragraph (8).
2004 - Pub.L. 108-357, Sec 320(a). Section 108(f) (relating to student
loans) is amended by adding at the end the new paragraph (4).
Effective Date.--The <<NOTE: 26 USC 108 note.>> amendments made
by this section shall apply to amounts received by an individual in
taxable years beginning after December 31, 2003.
2002 - Subsec. (d)(7)(A). Pub. L. 107-147, Sec. 402, amended
by inserting before the period ``, including by not
taking into account under section 1366(a) any amount excluded under
subsection (a) of this section''.
<<NOTE: Applicability.>> In general.--Except as
provided in paragraph (2), the amendment made by this section
shall apply to discharges of indebtedness after October 11,
2001, in taxable years ending after such date.
Exception.--The amendment made by this section shall not
apply to any discharge of indebtedness before March 1, 2002,
pursuant to a plan of reorganization filed with a bankruptcy
court on or before October 11, 2001.
1998 - Subsec. (f)(2). Pub. L. 105-206, Sec. 6004(f)(1), amended
concluding provisions generally. Prior to amendment, concluding
provisions read as follows: ''The term 'student loan' includes any
loan made by an educational organization so described or by an
organization exempt from tax under section 501(a) to refinance a
loan meeting the requirements of the preceding sentence.''
Subsec. (f)(3). Pub. L. 105-206, Sec. 6004(f)(2), struck out
''(or by an organization described in paragraph (2)(E) from funds
provided by an organization described in paragraph (2)(D))'' after
''paragraph (2)(D)''.
1997 - Subsec. (f)(2). Pub. L. 105-34, Sec. 225(a)(1), added
subpar. (D) and concluding provisions and struck out former subpar.
(D) which read as follows: ''any educational organization so
described pursuant to an agreement with any entity described in
subparagraph (A), (B), or (C) under which the funds from which the
loan was made were provided to such educational organization.''
Subsec. (f)(2)(B). Pub. L. 105-34, Sec. 225(a)(1), struck out
''or'' at end.
Subsec. (f)(3). Pub. L. 105-34, Sec. 225(a)(2), added par. (3).
1996 - Subsec. (d)(9)(A). Pub. L. 104-188 substituted ''paragraph
(3)(C)'' for ''paragraph (3)(B)''.
1993 - Subsec. (a)(1)(D). Pub. L. 103-66, Sec. 13150(a), added
subpar. (D).
Subsec. (a)(2)(A). Pub. L. 103-66, Sec. 13150(c)(1), substituted
'', (C), and (D)'' for ''and (C)''.
Subsec. (a)(2)(B). Pub. L. 103-66, Sec. 13150(c)(2), amended
heading and text of subpar. (B) generally. Prior to amendment,
text read as follows: ''Subparagraph (C) of paragraph (1) shall not
apply to a discharge to the extent the taxpayer is insolvent.''
Subsec. (b)(2)(C) to (E). Pub. L. 103-66, Sec. 13226(b)(1), added
subpar. (C) and redesignated former subpars. (C) and (D) as (D) and
(E), respectively. Former subpar. (E) redesignated (F).
Subsec. (b)(2)(F). Pub. L. 103-66, Sec. 13226(b)(2), added
subpar. (F). Former subpar. (F) redesignated (G).
Pub. L. 103-66, Sec. 13226(b)(1), redesignated subpar. (E) as
(F).
Subsec. (b)(2)(G). Pub. L. 103-66, Sec. 13226(b)(2), redesignated
subpar. (F) as (G).
Subsec. (b)(3)(B). Pub. L. 103-66, Sec. 13226(b)(3)(A), amended
heading and text of subpar. (B) generally. Prior to amendment,
text read as follows: ''The reductions described in subparagraphs
(B) and (E) of paragraph (2) shall be 33 1/3 cents for each dollar
excluded by subsection (a).''
Subsec. (b)(4)(B). Pub. L. 103-66, Sec. 13226(b)(3)(B),
substituted ''(D)'' for ''(C)'' in heading and text.
Subsec. (b)(4)(C). Pub. L. 103-66, Sec. 13226(b)(3)(C),
substituted ''(G)'' for ''(E)'' in heading and text.
Subsec. (c). Pub. L. 103-66, Sec. 13150(b), added subsec. (c).
Subsec. (d). Pub. L. 103-66, Sec. 13150(c)(3)(B), substituted
''certain provisions'' for ''subsections (a), (b) and (g)'' in
heading.
Subsec. (d)(6), (7)(A). Pub. L. 103-66, Sec. 13150(c)(3)(A), (C),
substituted ''Certain provisions'' for ''Subsections (a), (b) and
(g)'' in heading and ''subsections (a), (b), (c), and (g)'' for
''subsections (a), (b), and (g)'' in text.
Subsec. (d)(7)(B). Pub. L. 103-66, Sec. 13150(c)(4), inserted at
end ''The preceding sentence shall not apply to any discharge to
the extent that subsection (a)(1)(D) applies to such discharge.''
Subsec. (d)(9)(A). Pub. L. 103-66, Sec. 13150(c)(5), inserted
''or under paragraph (3)(B) of subsection (c)'' after ''subsection
(b)''.
Subsec. (e)(6). Pub. L. 103-66, Sec. 13226(a)(2)(B), substituted
''Except as provided in regulations, for'' for ''For''.
Subsec. (e)(8). Pub. L. 103-66, Sec. 13226(a)(1)(B), amended
heading and text of par. (8) generally. Prior to amendment, text
read as follows: ''For purposes of determining income of the debtor
from discharge of indebtedness, the stock for debt exception shall
not apply -
''(A) to the issuance of nominal or token shares, or
''(B) with respect to an unsecured creditor, where the ratio of
the value of the stock received by such unsecured creditor to the
amount of his indebtedness cancelled or exchanged for stock in
the workout is less than 50 percent of a similar ratio computed
for all unsecured creditors participating in the workout.
Any stock which is disqualified stock (as defined in paragraph
(10)(B)(ii)) shall not be treated as stock for purposes of this
paragraph.''
Subsec. (e)(10), (11). Pub. L. 103-66, Sec. 13226(a)(1)(A),
redesignated par. (11) as (10) and struck out former par. (10)
which related to satisfaction of indebtedness by transfer of
corporation's stock.
Subsec. (g)(3)(B). Pub. L. 103-66, Sec. 13226(b)(3)(D),
substituted ''subparagraphs (A), (B), (C), (D), (F), and (G)'' for
''subparagraphs (A), (B), (C), and (E)'' and ''subparagraphs (B),
(C), and (G)'' for ''subparagraphs (B) and (E)'' and inserted
before period at end ''and the attribute described in subparagraph
(F) of subsection (b)(2) to the extent attributable to any passive
activity credit carryover''.
1990 - Subsec. (e)(8). Pub. L. 101-508, Sec. 11325(b)(2),
inserted provision at end that any stock which is a disqualified
stock, as so defined, not be treated as stock for purposes of this
paragraph.
Subsec. (e)(10)(B). Pub. L. 101-508, Sec. 11325(b)(1),
substituted heading for one which read: ''Exception for title 11
cases and insolvent debtors'' and amended text generally. Prior to
amendment, text read as follows: ''Subparagraph (A) shall not apply
in the case of a debtor in a title 11 case or to the extent the
debtor is insolvent.''
Subsec. (e)(11). Pub. L. 101-508, Sec. 11325(a)(1), added par.
(11).
Subsec. (g)(1)(B). Pub. L. 101-508, Sec. 11813(b)(6), substituted
''section 49(a)(1)(D)(iv)'' for ''section 46(c)(8)(D)(iv)''.
1988 - Subsec. (a)(1)(C). Pub. L. 100-647, Sec. 1004(a)(1), added
subpar. (C).
Subsec. (a)(2). Pub. L. 100-647, Sec. 1004(a)(2), amended par.
(2) generally. Prior to amendment, par. (2) read as follows:
''Subparagraph (B) of paragraph (1) shall not apply to a discharge
which occurs in a title 11 case.''
Subsec. (b). Pub. L. 100-647, Sec. 1004(a)(3), struck out ''in
title 11 case or insolvency'' after ''Reduction of tax attributes''
in heading and substituted ''subparagraph (A), (B), or (C)'' for
''subparagraph (A) or (B)'' in text of par. (1).
Subsec. (d). Pub. L. 100-647, Sec. 1004(a)(6)(B), which directed
amendment of subsec. (d) heading by substituting ''subsections (a),
(b), and (g)'' for ''subsections (a), and (b)'', was executed by
making the substitution for ''subsections (a) and (b)'' as the
probable intent of Congress.
Subsec. (d)(6). Pub. L. 100-647, Sec. 1004(a)(6)(A), (C),
substituted ''Subsections (a), (b), and (g)'' for ''Subsections (a)
and (b)'' in heading and ''subsections (a), (b), and (g)'' for
''subsections (a) and (b)'' in text.
Subsec. (d)(7)(A). Pub. L. 100-647, Sec. 1004(a)(6)(A), (C),
substituted ''Subsections (a), (b), and (g)'' for ''Subsections (a)
and (b)'' in heading and ''subsections (a), (b), and (g)'' for
''subsections (a) and (b)'' in text.
Subsec. (g). Pub. L. 100-647, Sec. 1004(a)(4), substituted
''indebtedness'' for ''indebtedness of solvent farmers'' in heading
and amended text generally. Prior to amendment, text read as
follows:
''(1) In general. - For purposes of this section and section
1017, the discharge by a qualified person of qualified farm
indebtedness of a taxpayer who is not insolvent at the time of the
discharge shall be treated in the same manner as if the discharge
had occurred when the taxpayer was insolvent.
''(2) Qualified farm indebtedness. - For purposes of this
subsection, indebtedness of a taxpayer shall be treated as
qualified farm indebtedness if -
''(A) such indebtedness was incurred directly in connection
with the operation by the taxpayer of the trade or business of
farming, and
''(B) 50 percent or more of the average annual gross receipts
of the taxpayer for the 3 taxable years preceding the taxable
year in which the discharge of such indebtedness occurs is
attributable to the trade or business of farming.
''(3) Qualified person. - For purposes of this subsection, the
term 'qualified person' means a person described in section
46(c)(8)(D)(iv).''
1986 - Subsec. (a)(1)(C). Pub. L. 99-514, Sec. 822(a), struck out
subpar. (C) relating to exclusion from gross income if the
indebtedness discharged is qualified business indebtedness.
Subsec. (a)(2). Pub. L. 99-514, Sec. 822(b)(1), substituted
''Subparagraph (B) of paragraph (1)'' for ''Subparagraphs (B) and
(C) of paragraph (1)'' in subpar. (A), struck out subpar. (A)
designation and heading, and struck out subpar. (B) providing that
insolvency exclusion takes precedence over qualified business
exclusion.
Subsec. (b)(2)(B). Pub. L. 99-514, Sec. 231(d)(3)(D), substituted
''General business credit'' for ''Research credit and general
business credit'' in heading and amended text, as amended by this
Act (Pub. L. 99-514, Sec. 1171(b)(4) (see below)), generally.
Prior to amendment, text read as follows: ''Any carryover to or
from the taxable year of a discharge of an amount for purposes of
determining the amount allowable as a credit under -
''(i) section 30 (relating to credit for increasing research
activities), or
''(ii) section 38 (relating to general business credit).
For purposes of this subparagraph, there shall not be taken into
account any portion of a carryover which is attributable to the
employee stock ownership credit determined under section 41.''
Pub. L. 99-514, Sec. 1171(b)(4), struck out last sentence which
had been eliminated by the general amendment of subpar. (B) by Pub.
L. 99-514, Sec. 231(d)(3)(D). See above.
Subsec. (b)(2)(E). Pub. L. 99-514, Sec. 1847(b)(7), substituted
''section 27'' for ''section 33''.
Subsec. (b)(3). Pub. L. 99-514, Sec. 104(b)(2), substituted ''33
1/3 cents'' for ''50 cents''.
Subsec. (c). Pub. L. 99-514, Sec. 822(b)(2), struck out subsec.
(c) relating to tax treatment of discharge of qualified business
indebtedness.
Subsec. (d). Pub. L. 99-514, Sec. 822(b)(3)(B), struck out
reference to subsec. (c) in heading.
Subsec. (d)(4). Pub. L. 99-514, Sec. 822(b)(3)(A), struck out
par. (4) relating to treatment of indebtedness as qualified
business indebtedness.
Subsec. (d)(6), (7)(A). Pub. L. 99-514, Sec. 822(b)(3)(B), struck
out reference to subsec. (c) in heading and text.
Subsec. (d)(7)(B). Pub. L. 99-514, Sec. 822(b)(3)(C), struck out
''The preceding sentence shall not apply to any discharge to the
extent that subsection (a)(1)(C) applies to such discharge.''
Subsec. (d)(9)(A). Pub. L. 99-514, Sec. 822(b)(3)(D), struck out
''under paragraph (4) of this subsection or'' after ''An
election''.
Subsec. (e)(7)(A)(ii)(I). Pub. L. 99-514, Sec. 805(c)(2),
substituted ''subsection (a) or (b) of section 166'' for
''subsection (a), (b), or (c) of section 166''.
Subsec. (e)(7)(B) to (D). Pub. L. 99-514, Sec. 805(c)(3),
redesignated subpars. (C) to (E) as (B) to (D), respectively, and
struck out former subpar. (B) which related to taxpayers on reserve
method.
Subsec. (e)(7)(E), (F). Pub. L. 99-514, Sec. 805(c)(3), (4),
redesignated subpar. (F) as (E) and substituted ''the foregoing
subparagraphs'' for ''subparagraphs (A), (B), (C), (D), and (E)''.
Former subpar. (E) redesignated (D).
Subsec. (e)(10)(C). Pub. L. 99-514, Sec. 621(e), repealed the
amendment by Pub. L. 98-369, Sec. 59(b)(1), which had added subpar.
(C) creating an exception for transfers in certain workouts of the
satisfaction of indebtedness by corporation's stock. See 1984
Amendment note below.
Subsec. (g). Pub. L. 99-514, Sec. 405(a), added subsec. (g).
1984 - Subsec. (b)(2)(B). Pub. L. 98-369, Sec. 474(r)(5),
substituted provisions relating to research credits and general
business credits covering carryovers to or from the taxable year of
a discharge of an amount for purposes of determining the amount
allowable as a credit under section 30 (relating to credit for
increasing research activities), or section 38 (relating to general
business credit), and directing that there shall not be taken into
account any portion of a carryover which is attributable to the
employee stock ownership credit determined under section 41 for
former provisions covering carryovers to or from the taxable year
of the discharge of an amount for purposes of determining the
amount of a credit allowable under section 38 (relating to
investment in certain depreciable property), section 40 (relating
to expenses of work incentive programs), section 44B (relating to
credit for employment of certain new employees), section 44E
(relating to alcohol used as a fuel), or section 44F (relating to
credit for increasing research activities), and directing that, for
purposes of clause (i), there could not be taken into account any
portion of a carryover which was attributable to the employee plan
credit (within the meaning of section 48(o)(3)).
Subsec. (d)(6). Pub. L. 98-369, Sec. 721(b)(2), struck out ''or S
corporation shareholder level'' in heading and second sentence
which provided that ''In the case of an S corporation, subsections
(a), (b), and (c) shall apply at the shareholder level.''. See
par. (7)(A).
Subsec. (d)(7) to (10). Pub. L. 98-369, Sec. 721(b)(2), added
par. (7) and redesignated former pars. (7) to (9) as (8) to (10),
respectively.
Subsec. (e)(10). Pub. L. 98-369, Sec. 59(a), added par. (10).
Subsec. (e)(10)(C). Pub. L. 98-369, Sec. 59(b)(1), which added
subpar. (C), effective as if included in the amendments made by
section 806(e) and (f) of Pub. L. 94-455, was repealed by Pub. L.
99-514, Sec. 621(e), (f)(2), eff. Jan. 1, 1986, with certain
exceptions, see Effective Date of 1986 Amendment note below.
Subsec. (f). Pub. L. 98-369, Sec. 1076(a), added subsec. (f).
1983 - Subsec. (b)(2)(B)(v). Pub. L. 97-448, Sec. 102(h)(1),
added cl. (v).
Subsec. (e)(7)(A)(iii). Pub. L. 97-448, Sec. 304(d), added cl.
(iii).
1982 - Subsec. (d)(6). Pub. L. 97-354 inserted ''or S corporation
shareholder level'' in heading and inserted ''In the case of an S
corporation, subsections (a), (b), and (c) shall be applied at the
shareholder level.''
1980 - Pub. L. 96-589 completely revised and expanded provisions
by specifying the types of indebtedness and by setting out
priorities among the exclusions, to reflect the revision of Title
11, Bankruptcy, in 1978.
1976 - Pub. L. 94-455, Sec. 1951(b)(2)(A), struck out ''(a)
Special rule of exclusion. - '' after ''Income from discharge of
indebtedness'' and struck out subsec. (b) which related to
discharge, cancellation, or modification of indebtedness of certain
railroad corporations.
Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out ''or his
delegate'' after ''Secretary''.
1960 - Subsec. (b). Pub. L. 86-496 provided that if the
discharge, cancellation, or modification of any indebtedness is
effected pursuant to a court order in a receivership proceeding or
in a proceeding under section 77 of the Bankruptcy Act, commenced
before Jan. 1, 1960, then no amount is to be included in gross
income with respect to it, and struck out provisions which made
subsection inapplicable to discharges occurring in a taxable year
beginning after Dec. 31, 1957.
1956 - Subsec. (b). Act June 29, 1956, substituted ''December 31,
1957'' for ''December 31, 1955''.
EFFECTIVE DATE OF 2005 AMENDMENT
P.L. 109-73
Section 401(e) Effective Date.--This section shall apply to discharges made on
or after August 25, 2005, and before January 1, 2007.
EFFECTIVE DATE OF 2004 AMENDMENT
Amendment by Pub.L.108-357,Sec.896(a), shall apply with respect
to cancellations of indebtedness occurring on or after the date
of the enactment of this Act.
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by Pub. L. 105-206 effective, except as otherwise
provided, as if included in the provisions of the Taxpayer Relief
Act of 1997, Pub. L. 105-34, to which such amendment relates, see
section 6024 of Pub. L. 105-206, set out as a note under section 1
of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 225(b) of Pub. L. 105-34 provided that: ''The amendments
made by this section (amending this section) shall apply to
discharges of indebtedness after the date of the enactment of this
Act (Aug. 5, 1997).''
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by Pub. L. 104-188 effective as if included in the
provision of the Revenue Reconciliation Act of 1993, Pub. L.
103-66, Sec. 13001-13444, to which such amendment relates, see
section 1703(o) of Pub. L. 104-188, set out as a note under section
39 of this title.
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13150(d) of Pub. L. 103-66 provided that: ''The
amendments made by this section (amending this section and sections
703 and 1017 of this title) shall apply to discharges after
December 31, 1992, in taxable years ending after such date.''
Section 13226(a)(3) of Pub. L. 103-66 provided that:
''(A) In general. - Except as otherwise provided in this
paragraph, the amendments made by this subsection (amending this
section and section 382 of this title) shall apply to stock
transferred after December 31, 1994, in satisfaction of any
indebtedness.
''(B) Exception for title 11 cases. - The amendments made by this
subsection shall not apply to stock transferred in satisfaction of
any indebtedness if such transfer is in a title 11 or similar case
(as defined in section 368(a)(3)(A) of the Internal Revenue Code of
1986) which was filed on or before December 31, 1993.''
Section 13226(b)(4) of Pub. L. 103-66 provided that: ''The
amendments made by this subsection (amending this section) shall
apply to discharges of indebtedness in taxable years beginning
after December 31, 1993.''
EFFECTIVE DATE OF 1990 AMENDMENT
Section 11325(c) of Pub. L. 101-508 provided that:
''(1) In general. - Except as provided in paragraph (2), the
amendments made by this section (amending this section and section
1275 of this title) shall apply to debt instruments issued, and
stock transferred, after October 9, 1990, in satisfaction of any
indebtedness.
''(2) Exceptions. - The amendments made by this section shall not
apply to any debt instrument issued, or stock transferred, in
satisfaction of any indebtedness if such issuance or transfer (as
the case may be) -
''(A) is in a title 11 or similar case (as defined in section
368(a)(3)(A) of the Internal Revenue Code of 1986) which was
filed on or before October 9, 1990,
''(B) is pursuant to a written binding contract in effect on
October 9, 1990, and at all times thereafter before such issuance
or transfer,
''(C) is pursuant to a transaction which was described in
documents filed with the Securities and Exchange Commission on or
before October 9, 1990, or
''(D) is pursuant to a transaction -
''(i) the material terms of which were described in a written
public announcement on or before October 9, 1990,
''(ii) which was the subject of a prior filing with the
Securities and Exchange Commission, and
''(iii) which is the subject of a subsequent filing with the
Securities and Exchange Commission before January 1, 1991.''
Amendment by section 11813(b)(6) of Pub. L. 101-508 applicable to
property placed in service after Dec. 31, 1990, but not applicable
to any transition property (as defined in section 49(e) of this
title), any property with respect to which qualified progress
expenditures were previously taken into account under section 46(d)
of this title, and any property described in section 46(b)(2)(C) of
this title, as such sections were in effect on Nov. 4, 1990, see
section 11813(c) of Pub. L. 101-508, set out as a note under
section 29 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 104(b)(2) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, see section 151(a) of
Pub. L. 99-514, set out as a note under section 1 of this title.
Amendment by section 231(d)(3)(D) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1985, see section 231(g) of
Pub. L. 99-514, set out as a note under section 41 of this title.
Section 405(c) of Pub. L. 99-514 provided that: ''The amendments
made by this section (amending this section and section 1017 of
this title) shall apply to discharges of indebtedness occurring
after April 9, 1986, in taxable years ending after such date.''
Repeal by section 621(e)(1) of Pub. L. 99-514 of amendment by
section 59(b)(1) of Pub. L. 99-369, which was effective as if
included in the amendments made by section 806(e) and (f) of Pub.
L. 94-455, effective Jan. 1, 1986, with certain exceptions, see
section 621(f)(2) of Pub. L. 99-514, set out as a note under
section 382 of this title.
Amendment by section 805(c)(2), (4) of Pub. L. 99-514 applicable
to taxable years beginning after Dec. 31, 1986, with certain
changes required in method of accounting, see section 805(d) of
Pub. L. 99-514, set out as a note under section 166 of this title.
Section 822(c) of Pub. L. 99-514 provided that: ''The amendments
made by this section (amending this section and section 1017 of
this title) shall apply to discharges after December 31, 1986.''
Amendment by section 1171(b)(4) of Pub. L. 99-514 applicable to
compensation paid or accrued after Dec. 31, 1986, in taxable years
ending after such date, except as otherwise provided, see section
1171(c) of Pub. L. 99-514, set out as a note under section 38 of
this title.
Amendment by section 1847(b)(7) of Pub. L. 99-514 effective,
except as otherwise provided, as if included in the provisions of
the Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such
amendment relates, see section 1881 of Pub. L. 99-514, set out as a
note under section 48 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Section 59(b)(2) of Pub. L. 98-369 provided that: ''The amendment
made by paragraph (1) (amending this section) shall take effect as
if it had been included in the amendments made by subsections (e)
and (f) of section 806 of the Tax Reform Act of 1976 (Pub. L.
94-455).'' See Effective Date of 1976 Amendment note set out under
section 382 of this title.
Section 59(b)((c)) of Pub. L. 98-369 provided that:
''(1) In general. - Except as otherwise provided in this
subsection, the amendment made by subsection (a) (amending this
section) shall apply to transfers after the date of the enactment
of this Act (July 18, 1984) in taxable years ending after such
date.
''(2) Transitional rule. - The amendment made by subsection (a)
shall not apply to the transfer by a corporation of its stock in
exchange for debt of the corporation after the date of the
enactment of this Act if such transfer is -
''(A) pursuant to a written contract requiring such transfer
which was binding on the corporation at all times on June 7,
1984, and at all times after such date but only if the transfer
takes place before January 1, 1985, and only if the transferee
held the debt at all times on June 7, 1984, or
''(B) pursuant to the exercise of an option to exchange debt
for stock but only if such option was in effect at all times on
June 7, 1984, and at all times after such date and only if at all
times on June 7, 1984, the option and the debt were held by the
same person.
''(3) Certain transfers to controlling shareholder. - The
amendment made by subsection (a) shall not apply to any transfer
before January 1, 1985, by a corporation of its stock in exchange
for debt of such corporation if -
''(A) such transfer is to another corporation which at all
times on June 7, 1984, owned 75 percent or more of the total
value of the stock of the corporation making such transfer, and
''(B) immediately after such transfer, the transferee
corporation owns 80 percent or more of the total value of the
stock of the transferor corporation.
''(4) Certain transfers pursuant to debt restructure agreement. -
The amendment made by subsection (a) shall not apply to the
transfer by a corporation of its stock in exchange for debt of the
corporation after the date of the enactment of this Act and before
January 1, 1985, if -
''(A) such transfer is covered by a debt restructure agreement
entered into by the corporation during November 1983, and
''(B) such agreement was specified in a registration statement
filed with the Securities and Exchange Commission by the
corporation on March 7, 1984.''
Amendment by section 474(r)(5) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, and to carrybacks from
such years, see section 475(a) of Pub. L. 98-369, set out as a note
under section 21 of this title.
Amendment by section 721(b) of Pub. L. 98-369 applicable to
contributions to capital after Dec. 31, 1980, in taxable years
ending after such date, see section 721(y)(2) of Pub. L. 98-369,
set out as a note under section 1361 of this title.
Section 1076(b) of Pub. L. 98-369 provided that: ''The amendments
made by this section (amending this section) shall apply to
discharges of indebtedness made on or after January 1, 1983.''
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by title I of Pub. L. 97-448 effective, except as
otherwise provided, as if it had been included in the provision of
the Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE OF 1982 AMENDMENT
Amendment by Pub. L. 97-354 applicable to taxable years beginning
after Dec. 31, 1982, see section 6(a) of Pub. L. 97-354, set out as
an Effective Date note under section 1361 of this title.
EFFECTIVE DATE OF 1980 AMENDMENT
Section 7 of Pub. L. 96-589, as amended by Pub. L. 99-514, Sec.
2, Oct. 22, 1986, 100 Stat. 2095, provided that:
''(a) For Section 2 (Relating to Tax Treatment of Discharge of
Indebtedness). -
''(1) In general. - Except as provided in paragraph (2), the
amendments made by section 2 (amending this section and sections
111, 118, 382, 703 and 1017 of this title) shall apply to any
transaction which occurs after December 31, 1980, other than a
transaction which occurs in a proceeding in a bankruptcy case or
similar judicial proceeding (or in a proceeding under the
Bankruptcy Act) (Title 11, Bankruptcy) commencing on or before
December 31, 1980.
''(2) Transitional rule. - In the case of any discharge of
indebtedness to which subparagraph (A) or (B) of section
108(a)(1) of the Internal Revenue Code of 1986 (formerly I.R.C.
1954) (relating to exclusion from gross income), as amended by
section 2, applies and which occurs before January 1, 1982, or
which occurs in a proceeding in a bankruptcy case or similar
judicial proceedings commencing before January 1, 1982, then -
''(A) section 108(b)(2) of the such Code (relating to
reduction of tax attributes), as so amended, shall be applied
without regard to subparagraphs (A), (B), (C), and (E) thereof,
and
''(B) the basis of any property shall not be reduced under
section 1017 of such Code (relating to reduction in basis in
connection with discharges of indebtedness), as so amended,
below the fair market value of such property on the date the
debt is discharged.
''(b) For Section 3 (Relating to Rules Relating to Title 11 Cases
for Individuals). - The amendments made by section 3 (enacting
sections 1398 and 1399 of this title and amending sections 443,
6012 and 6103 of this title) shall apply to any bankruptcy case
commencing more than 90 days after the date of the enactment of
this Act (Dec. 24, 1980).
''(c) For Section 4 (Relating to Corporate Reorganization
Provisions). -
''(1) In general. - The amendments made by section 4 (enacting
section 370 of this title and amending sections 354, 355, 357,
368 and 381 of this title) shall apply to any bankruptcy case or
similar judicial proceeding commencing after December 31, 1980.
''(2) Exchanges of property for accrued interest. - The
amendments made by subsection (e) of section 4 (amending sections
354 and 355 of this title) (relating to treatment of property
attributable to accrued interest) shall also apply to any
exchange -
''(A) which occurs after December 31, 1980, and
''(B) which does not occur in a bankruptcy case or similar
judicial proceeding (or in a proceeding under the Bankruptcy
Act) commenced on or before December 31, 1980.
''(d) For Section 5 (Relating to Miscellaneous Corporate
Amendments). -
''(1) For subsection (a) (relating to exemption from personal
holding company tax). - The amendments made by subsection (a) of
section 5 (amending section 542 of this title) shall apply to any
bankruptcy case or similar judicial proceeding commenced after
December 31, 1980.
''(2) For subsection (b) (relating to repeal of special
treatment for certain railroad redemptions). - The amendments
made by subsection (b) of section 5 (amending section 302 of this
title) shall apply to stock which is issued after December 31,
1980 (other than stock issued pursuant to a plan of
reorganization approved on or before that date).
''(3) For subsection (c) (relating to application of 12-month
liquidation rule). - The amendment made by subsection (c) of
section 5 (amending section 337 of this title) shall apply to any
bankruptcy case or similar judicial proceeding commenced after
December 31, 1980.
''(4) For subsection (d) (relating to permitting bankruptcy
estate to be subchapter s shareholder). - The amendment made by
subsection (d) of section 5 (amending section 1371 of this title)
shall apply to any bankruptcy case commenced on or after October
1, 1979.
''(5) For subsection (e) (relating to certain transfers to
controlled corporations). - The amendments made by subsection (e)
of section 5 (amending section 351 of this title) shall apply as
provided in subsection (a) of this section.
''(6) For subsection (f) (relating to effect of debt discharge
on earnings and profits). - The amendment made by subsection (f)
of section 5 (amending section 312 of this title) shall apply as
provided in subsection (a) of this section.
''(e) For Section 6 (Relating to Changes in Tax Procedures). -
The amendments made by section 6 (enacting sections 6658 and 7464
of this title, amending sections 128, 354, 422, 1023, 3302, 6012,
6036, 6155, 6161, 6212, 6213, 6216, 6326 (now 6327), 6404, 6503,
6512, 6532, 6871, 6872, 6873, 7430, and 7508 of this title,
repealing section 1018 of this title, and redesignating former
section 7464 of this title as 7465) shall take effect on October 1,
1979, but shall not apply to any proceeding under the Bankruptcy
Act (Title 11) commenced before October 1, 1979.
''(f) Election To Substitute September 30, 1979, for December 31,
1980. -
''(1) In general. - The debtor (or debtors) in a bankruptcy
case or similar judicial proceeding may (with the approval of the
court) elect to apply subsections (a), (c), and (d) by
substituting 'September 30, 1979' for 'December 31, 1980' each
place it appears in such subsections.
''(2) Effect of election. - Any election made under paragraph
(1) with respect to any proceeding shall apply to all parties to
the proceeding.
''(3) Revocation only with consent. - Any election under this
subsection may be revoked only with the consent of the Secretary
of the Treasury or his delegate.
''(4) Time and manner of election. - Any election under this
subsection shall be made at such time, and in such manner, as the
Secretary of the Treasury or his delegate may by regulations
prescribe.
''(g) Definitions. - For purposes of this section -
''(1) Bankruptcy case. - The term 'bankruptcy case' means any
case under title 11 of the United States Code (as recodified by
Public Law 95-598).
''(2) Similar judicial proceeding. - The term 'similar judicial
proceeding' means a receivership, foreclosure, or similar
proceeding in a Federal or State court (as modified by section
368(a)(3)(D) of the Internal Revenue Code of 1986).''
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1951(b)(2)(A) of Pub. L. 94-455 applicable
with respect to taxable years beginning after Dec. 31, 1976, see
section 1951(d) of Pub. L. 94-455, set out as a note under section
72 of this title.
EFFECTIVE DATE OF 1960 AMENDMENT
Section 1(b) of Pub. L. 86-496 provided that: ''The amendment
made by subsection (a) (amending this section) shall apply to
taxable years ending after December 31, 1959, but only with respect
to discharges occurring after such date.''
SAVINGS PROVISION
For provisions that nothing in amendment by section 11813 of Pub.
L. 101-508 be construed to affect treatment of certain transactions
occurring, property acquired, or items of income, loss, deduction,
or credit taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
Section 1951(b)(2)(B) of Pub. L. 94-455 provided that: ''If any
discharge, cancellation, or modification of indebtedness of a
railroad corporation occurs in a taxable year beginning after
December 31, 1976, pursuant to an order of a court in a proceeding
referred to in section 108(b)(A) or (B) which commenced before
January 1, 1960, then, notwithstanding the amendments made by
subparagraph (A) (amending this section) the provisions of
subsection (b) of section 108 shall be considered as not repealed
with respect to such discharge, cancellation, or modification of
indebtedness.''
EXCLUSION OF CERTAIN CANCELLATIONS OF INDEBTEDNESS
Pub. L. 107-134, title I, Sec. 105, Jan. 23, 2002, 115 Stat.
2432, provided that:
''(a) In General. - For purposes of the Internal Revenue Code of
1986 -
''(1) gross income shall not include any amount which (but for
this section) would be includible in gross income by reason of
the discharge (in whole or in part) of indebtedness of any
taxpayer if the discharge is by reason of the death of an
individual incurred as the result of the terrorist attacks
against the United States on September 11, 2001, or as the result
of illness incurred as a result of an attack involving anthrax
occurring on or after September 11, 2001, and before January 1,
2002; and
''(2) return requirements under section 6050P of such Code
shall not apply to any discharge described in paragraph (1).
''(b) Effective Date. - This section shall apply to discharges
made on or after September 11, 2001, and before January 1, 2002.''
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI (Sec. 1101-1147 and 1171-1177) or title
XVIII (Sec. 1800-1899A) of Pub. L. 99-514 require an amendment to
any plan, such plan amendment shall not be required to be made
before the first plan year beginning on or after Jan. 1, 1989, see
section 1140 of Pub. L. 99-514, as amended, set out as a note under
section 401 of this title.
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 118, 147, 382, 703, 773,
774, 1017, 1503 of this title.
