A significant portion of our commercial real estate activity these days centers around the negotiation of loan workouts with lenders, or a reaction to the lender’s exercise of its remedies with respect to defaulted loans. Facing the economic consequences of the workout is bad enough, but these economic consequences to the borrower typically are compounded by adverse tax consequences. Moreover, even lenders can have adverse tax consequences.
This webinar was devoted to a review of the tax issues associated with loan workouts and possible strategies to avoid adverse tax consequences, from both the borrower and lender standpoint.
The seminar reviewed cancellation of debt income, application of the original issue discount rules in connection with deemed exchanges of debt instruments, and protective deal structures and tax elections. This review included a timely discussion of the potential adverse tax consequences to investors who may be in the business of purchasing “Legacy Loans” (a/k/a toxic assets) at a discount.
