Tax Consequences to Debtors and Creditors of Credit Bids, Foreclosures, and Deeds in Lieu of Foreclosure

Session Description: 
These transactions involve transfers of property securing a loan to the creditor in satisfaction of the debt. The applicable federal tax rules determines the amount of taxable gain realized by the debtor. The rules also determine if the creditor realizes a beneficial bad debt deduction and/or gain or loss on its acquisition. A central issue is how tax law deals with the question of the fair market value of the property. This session will illustrate the alternatives to debtors and creditors and potential planning considerations impacting after tax cash results to both parties.
Learning Outcomes: 
Participants will understand how tax law operates in credit bid, foreclosure and deed in lieu transactions including how the tax law treats the issue of what is the fair market value of the property involved in the transaction. Such understanding can assist participants in representing their clients when property securing a loan is transferred from the debtor to the lender to satisfy the debt.
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