- 5 -
which consists of qualified farm indebtedness, or (4) which
consists of qualified real property business indebtedness. Sec.
108(a)(1).
With respect to the exclusion based upon a discharge when
the taxpayer is insolvent, the term “insolvent” is defined as the
excess of liabilities over the fair market value of assets. Sec.
108(d)(3). Insolvency is determined on the basis of the
taxpayer’s assets and liabilities immediately before the
discharge. See id.; Traci v. Commissioner, T.C. Memo. 1992-708.
Liabilities include excess nonrecourse debt, the amount by which
a nonrecourse debt exceeds the fair market value of the property
securing the debt, but only to the extent that the excess
nonrecourse debt is discharged.
With respect to the exclusion based upon a discharge of
qualified farm indebtedness, indebtedness of a taxpayer is
treated as qualified farm indebtedness if two conditions are
satisfied. First, such indebtedness must be incurred directly in
connection with the operation by the taxpayer of the trade or
business of farming. Sec. 108(g)(2)(A). Second, 50 percent or
more of the aggregate gross receipts of the taxpayer for the 3
taxable years preceding the taxable year in which the discharge
of such indebtedness occurs is attributable to the trade or
business of farming. Sec. 108(g)(2)(B).
Page: Previous 1 2 3 4 5 6 7 8 9 Next
Last modified: May 25, 2011