Attribute reduction rules for stand-alone C corporations

Find out how rules are applied to federal consolidated-return groups


Authored by RSM US LLP

This article first appeared in AIRA Journal.

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Distressed debt workouts and restructurings have dramatically increased during the current economic downturn. To the extent a debtor is insolvent or a debt discharge occurs in a title 11 bankruptcy, such cancellation of debt (COD) income is not taxable to the debtor. However, section 108(b) provides that the excluded COD income shall be applied to reduce tax attributes. 

The first part of this article reviews the general attribute reduction rules for stand-alone C corporations.  The second part of the article provides an overview discussing how these rules are applied to federal consolidated return groups under regulation section 1.1502-28.

Download the article to learn more about the attribute reduction rules and various elections contained in the regulations that may provide more beneficial outcomes depending on a taxpayer’s facts and circumstances.