Tough Times And Tax Bombs: Coping With COD Income

Law360, New York (April 19, 2012, 12:42 PM EDT) -- Restructuring the debt on your balance sheet is unpleasant at best since lenders just don't seem to appreciate that mineral prices always fluctuate. Unfortunately, a successful negotiation with your lenders can create cancellation of indebtedness income, or so called COD income, which can lead to a significant tax bill which your lenders may be unwilling to fund.

The key to dealing with potential COD income is considering when the income may occur, how much it might be, what the tax character is, who will report it, and whether it can be excluded or deferred.

COD income can be created in unexpected...

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