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April 28, 2015 Article 1 min read

In previous columns in this series on insolvent subsidiaries in a consolidated return context, we explored the deemed satisfaction and reissuance rule for transactions in intercompany obligations, cancellation of nonintercompany indebtedness, timing of worthless stock loss, tax attribute reduction caused by cancellation of indebtedness income, triggering of excess loss account , the circular basis adjustment rules with respect to the disposition of stock and the complex unified loss rule (ULR), focusing primarily on the disposition of an insolvent subsidiary with no ownership of any lower-tier subsidiary.

In looking at these various rules, we have assumed that the insolvent subsidiary does not own the stock of a lower-tier subsidiary. This is often not the case when you are dealing with the bankruptcy or insolvency of a large consolidated group. This column will begin to look at the application of (1) tax attribute reduction caused by cancellation of indebtedness, and (2) the ULR to situations where the insolvent subsidiary has lower-tier subsidiaries.

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