Proposed Regulations Issued on S Corporation Debt Cancellation

The IRS has issued proposed regulations that provide guidance on the manner in which an S corporation reduces its tax attributes under Sec. 108(b) for tax years in which it has cancellation of debt (COD) income that is excluded from gross income under Sec. 108(a). In particular, they address situations in which the aggregate amount of the shareholders' disallowed losses and deductions that are treated as a net operating loss (NOL) tax attribute of the S corporation exceeds the amount of the S corporation's excluded COD income.

The full text of the proposed regulations is available on NATP’s website at http://www.natptax.com/treasury_decisions.html