When borrowers struggle to meet their debt obligations, they may negotiate with creditors to modify the terms of their debt instrument. This could involve changes to the interest rate, repayment period, collateral, or other aspects of the debt. However, these modifications could potentially result in a taxable exchange of the original note for a modified one, a fact that may not be immediately apparent to the involved parties.
Thomas Phelan
Tom focuses his practice on federal and international income tax, including providing advice to clients on mergers and acquisitions, reorganizations, and cross-border restructurings. He has experience with tax issues related to corporate finance transactions and the taxation of financial instruments.
How Can I Claim a Business Bad Debt Deduction?
By Thomas Gray, Thomas Phelan, David Fournier, Evelyn Meltzer, Kenneth Listwak, Tori Lynn Remington & Heather Smillie on
Posted in Payments
Businesses can claim a bad debt deduction under the Internal Revenue Code when a customer fails to pay for services or products. However, the ability to claim this deduction depends on several factors, and businesses should be prepared to substantiate their claim if challenged by the IRS.