Meaning of terms; special rules relating to certain provisions
(1) Indebtedness of taxpayer
(1)Indebtedness of taxpayer#
For purposes of this section, the term “indebtedness of the taxpayer” means any indebtedness—
(A) for which the taxpayer is liable, or
(B) subject to which the taxpayer holds property.
(1)(A)#
for which the taxpayer is liable, or
(1)(B)#
subject to which the taxpayer holds property.
(2)Title 11 case#
For purposes of this section, the term “title 11 case” means a case under title 11 of the United States Code (relating to bankruptcy), but only if the taxpayer is under the jurisdiction of the court in such case and the discharge of indebtedness is granted by the court or is pursuant to a plan approved by the court.
(3)Insolvent#
For purposes of this section, the term “insolvent” means the excess of liabilities over the fair market value of assets. With respect to any discharge, whether or not the taxpayer is insolvent, and the amount by which the taxpayer is insolvent, shall be determined on the basis of the taxpayer’s assets and liabilities immediately before the discharge.
(4)Repealed. Pub. L. 99–514, title VIII, § 822(b)(3)(A) , Oct. 22, 1986 , 100 Stat. 2373 ]#
(5)Depreciable property#
The term “depreciable property” has the same meaning as when used in section 1017.
(6)Certain provisions to be applied at partner level#
In the case of a partnership, subsections (a), (b), (c), and (g) shall be applied at the partner level.
(7)Special rules for S corporation#
(A) Certain provisions to be applied at corporate level In the case of an S corporation, subsections (a), (b), (c), and (g) shall be applied at the corporate level, including by not taking into account under section 1366(a) any amount excluded under subsection (a) of this section.
(B) Reduction in carryover of disallowed losses and deductions In the case of an S corporation, for purposes of subparagraph (A) of subsection (b)(2), any loss or deduction which is disallowed for the taxable year of the discharge under section 1366(d)(1) shall be treated as a net operating loss for such taxable year. The preceding sentence shall not apply to any discharge to the extent that subsection (a)(1)(D) applies to such discharge.
(C) Coordination with basis adjustments under section 1367(b)(2) For purposes of subsection (e)(6), a shareholder’s adjusted basis in indebtedness of an S corporation shall be determined without regard to any adjustments made under section 1367(b)(2).
(7)(A)Certain provisions to be applied at corporate level#
In the case of an S corporation, subsections (a), (b), (c), and (g) shall be applied at the corporate level, including by not taking into account under section 1366(a) any amount excluded under subsection (a) of this section.
(7)(B)Reduction in carryover of disallowed losses and deductions#
In the case of an S corporation, for purposes of subparagraph (A) of subsection (b)(2), any loss or deduction which is disallowed for the taxable year of the discharge under section 1366(d)(1) shall be treated as a net operating loss for such taxable year. The preceding sentence shall not apply to any discharge to the extent that subsection (a)(1)(D) applies to such discharge.
(8)Reductions of tax attributes in title 11 cases of individuals to be made by estate#
In any case under chapter 7 or 11 of title 11 of the United States Code to which section 1398 applies, for purposes of paragraphs (1) and (5) of subsection (b) the estate (and not the individual) shall be treated as the taxpayer. The preceding sentence shall not apply for purposes of applying section 1017 to property transferred by the estate to the individual.
(9)Time for making election, etc.#
(A) Time An election under paragraph (5) of subsection (b) or under paragraph (3)(C) of subsection (c) shall be made on the taxpayer’s return for the taxable year in which the discharge occurs or at such other time as may be permitted in regulations prescribed by the Secretary.
(B) Revocation only with consent An election referred to in subparagraph (A), once made, may be revoked only with the consent of the Secretary.
(C) Manner An election referred to in subparagraph (A) shall be made in such manner as the Secretary may by regulations prescribe.
(9)(A)Time#
An election under paragraph (5) of subsection (b) or under paragraph (3)(C) of subsection (c) shall be made on the taxpayer’s return for the taxable year in which the discharge occurs or at such other time as may be permitted in regulations prescribed by the Secretary.
(9)(B)Revocation only with consent#
An election referred to in subparagraph (A), once made, may be revoked only with the consent of the Secretary.
(9)(C)Manner#
(10)Cross reference#
For provision that no reduction is to be made in the basis of exempt property of an individual debtor, see section 1017(c)(1).