Description of S. 1041 Relating to Capital Gain On Transfer of Farm Property in Discharge of Certain Farm Indebtedness : Scheduled for a Hearing Before the Subcommittee On Energy And Agricultural Taxation of the Senate Committee On Finance On July 28, 198
Description of S. 1041 Relating to Capital Gain On Transfer of Farm Property in Discharge of Certain Farm Indebtedness : Scheduled for a Hearing Before the Subcommittee On Energy And Agricultural Taxation of the Senate Committee On Finance On July 28, 198
United States. Congress. Joint Committee On Taxation
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Treatment of insolvent taxpayer If an insolvent taxpayer realizes income from discharge of indebtedness, the income is excluded and certain tax attributes of the taxpayer (including items such as net operating loss carryovers and basis in property) generally are reduced by the excluded amount. The exclusion is limited to the amount by which the taxpayer is insolvent. If the taxpayer's discharge of indebtedness income (not in excess of the amount by which the taxpayer is insolvent) exceeds these... tax attributes, the excess is forgiven, i.e., is not includible in income (sec. 108). Treatment of certain farm indebtedness The Tax Reform Act of 1986 provided that, in the case of a solvent taxpayer who realizes income from the discharge by a "qualified person" of "qualified farm indebtedness," the - 3 - discharge is treated in a manner similar to a discharge incurred by an insolvent taxpayer (sec. 108(g)). Qualified farm indebtedness is indebtedness incurred directly in connection with the operation of a farming business by a taxpayer who satisfies a specified gross receipts test.
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