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Resources

Below are links to websites that you might find useful. You can obtain forms, publications, and guidance regarding numerous tax issues:

Tax Sites for Federal Taxes

Tax Sites for California Taxes

Tax Sites for Other State's Taxes

Tax Sites for City and Local Taxes

Property Tax Sites

Tax Sites for Foreign Country Taxes

Accountants Sites

California Government Sites (except taxes)

Corporate, Partnership and LLC Formation Sites

Publications

Proposed Regulation 1.108-9

Application of insolvency and bankruptcy provisions of section 108 to disregarded entities and grantor trusts.

On April 13, 2011, the Department of Treasury published a proposed regulation relating to the exclusion from gross income under section 108(a) of discharge of indebtedness income of a grantor trust or disregarded entity. Essentially, the proposed regulation clarifies the term "taxpayer" as used in section 108(a)(1) and (d)(1) through (3) to be the owner(s) of the grantor trust or disregarded entity. The grantor trusts and disregarded entities will not be considered the owners for purposes of excluding discharge of indebtedness income. The proposed regulation also clarifies that in the case of partnerships, the owner rules apply at the partner level. Therefore, the individual partners will be allocated the discharge of indebtedness income. This regulation was drafted to clarify the application of the insolvency and bankruptcy exclusions with respect to discharge of indebtedness income. Taxpayers had previously taken the position that the insolvency exception is available to the extent a grantor trust or disregarded entity is insolvent. Under the proposed regulation, the insolvency exception is available only to the extent the owner(s) or partner(s) is insolvent. With respect to the bankruptcy exception, the proposed regulation clarifies that this exception is available only if the owner of the grantor trust or disregarded entity (or the partner(s) of a partnership) is subject to the bankruptcy court's jurisdiction. These rules will apply to discharge of indebtedness income occurring on or after the date final regulations are published in the Federal Register. A copy of the proposed regulation is available at: http://www.regulations.gov (IRS REG-154159-09).

Disregarded Entity

Several types of disregarded entities exist under the Internal Revenue Code ("Code") and Treasury Regulations. For example, a domestic single-member limited liability company that does not elect to be classified as a corporation falls within this category for Federal income tax purposes. Other examples include a corporation that is a qualified REIT subsidiary (within the meaning of section 856(i)(2) of the Code), and a corporation that is a qualified subchapter S subsidiary (within the meaning of section 1361(b)(3)(B) of the Code).

Grantor Trust

A grantor trust is defined (under subpart E of Part I of subchapter J of chapter 1) as any portion of a trust that is treated as being owned by the grantor or another person.

The implication for an owner, who elects not to individually file for bankruptcy relief or lacks sufficient evidence to establish insolvency, is that he or she may be exposed to an unexpected tax liability from recognition of discharge of indebtedness income. An owner of a grantor trust or disregarded entity (or partner in partnership) that seeks Title 11 relief solely for the entity or grantor trust may still qualify for the exclusion of cancellation of indebtedness income to the extent the owner is properly seen as being subject to the bankruptcy court's jurisdiction. See e.g., 2004 TNT 121-15 (Jose Gracia, et ux. v. Commissioner), T.C. Memo. 2004-147 (No. 6642-02)(United States Tax Court) (Section 108-Discharge of Indebtedness) (Release Date: June 22, 2004)(Doc 2004-12996).

Tax Notes Today Article

Naimi Publication on Definition of Assets