The current economic environment has resulted in a substantial number of loans secured by real property defaulting. These troubled loans have to be restructured or worked out. Many of the mortgagors, or owners, are unable or unwilling to provide additional equity to the properties secured by the troubled loans. The owners desire to maintain ownership of the troubled properties while avoiding substantial payments of tax to the Internal Revenue Service (IRS) in connection with a restructuring or workout that does not generate any significant cash.
This column will discuss the key issues that the owner of a troubled property faces when a troubled loan is modified.
Tax Consequences
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