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New Considerations in Debt Workouts under the American Recovery and Reinvestment Act of 2009  


Author:  Thomas A. Humphreys.; Stephen L. Feldman.; Robert A. N. Cudd.; Arthur Man.; Armin M. Gharagozlou.


Source: Volume 22, Number 05, May/June 2009 , pp.20-27(8)




Journal of Taxation and Regulation of Financial Institutions

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Abstract: 

On February 17, 2009, the American Recovery and Reinvestment Act of 2009 (“ARRA”) was signed into law. ARRA adds Section 108(i) to the Internal Revenue Code (the “Code”), which permits certain taxpayers to elect to defer, for federal income tax purposes, the recognition of cancellation-of-indebtedness (“COD”) income arising from certain repurchases, exchanges or modifications of outstanding debt that occur during 2009 and 2010. ARRA also amends Section 163(e)(5), suspending the limitations on interest deductions for certain applicable high yield discount obligations (“AHYDOs”) issued in 2008 and 2009. While temporary, these provisions should facilitate or remove barriers from the repurchase, refinancing, or restructuring of debt instruments trading at discounts.

Keywords: Cancellation of Indebtedness; Applicable High-Yield Discount Obligations

Affiliations:  1: Morrison & Foerster LLP; 2: Morrison & Foerster LLP; 3: Morrison & Foerster LLP; 4: Morrison & Foerster LLP; 5: Morrison & Foerster LLP.

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