Current through August 31, 2023
Section
63-3022(c), Idaho
Code
01.
In General. Any
taxpayer excluding from taxable income an amount resulting from the discharge
of indebtedness in bankruptcy under Section
108(b) of the
Internal Revenue Code, is to reduce Idaho net operating loss and basis in
accordance with Section
346 of the Bankruptcy Code of the
United States. If the discharge occurs outside of bankruptcy, the provisions of
these rules do not apply. (4-6-23)
02.
Order of Reduction. The
reduction referred to in Subsection
210.01 is to be made to the
following tax attributes in the following order: (4-6-23)
a. Any net operating loss deduction, as
defined in Rule 201 of these
rules, is to be reduced by the amount of the indebtedness forgiven or
discharged in bankruptcy except as follows: (4-6-23)
i. A deduction with respect to the liability
which is disallowed for any taxable period during or after the liability is
forgiven or discharged. A deduction with respect to the liability includes a
capital loss incurred on the disposition of a capital asset with respect to a
liability that was incurred in connection with the acquisition of such asset.
(4-6-23)
ii. To the extent that the
indebtedness forgiven or discharged consisted of items of a deductible nature
that were not deducted by the taxpayer, or resulted in an expired net operating
loss deduction or carryover that did not offset income for any taxable period
and did not contribute to a net operating loss in or a net operating loss
carryover to the taxable period during or after the indebtedness was
discharged. (4-6-23)
b.
The basis in the taxpayer's property or of property transferred to an entity
required to use the taxpayer's basis in whole or in part is to be reduced by
the lesser of: (4-6-23)
i. The amount of the
forgiven or discharged indebtedness, minus the total amount of adjustments made
under Subsection 210.02.a.; and
(4-6-23)
ii. The amount of the
debtor's total basis of assets before the discharge that exceeds the total
preexisting liabilities still remaining after discharge of indebtedness. Basis
may not be reduced below a level equal to the remaining undischarged
liabilities. (4-6-23)
03.
Exception to Basis
Reduction. The basis reduction under Subsection
210.02.b. is not required if
the taxpayer elects to treat the amount that would otherwise be applied in
reduction of basis as taxable income of the taxable period in which the debt is
forgiven or discharged. (4-6-23)
04.
Discharge Not Treated as Discharged
Indebtedness. The following provisions exclude from this rule
indebtedness that is discharged and treat the debtor as if it had originally
issued stock instead of debt. No reduction to the Idaho net operating loss or
basis is required if one (1) or more of these provisions are satisfied.
(4-6-23)
a. The indebtedness did not consist
of items of a deductible nature and is exchanged for an equity security, other
than a limited partnership interest, issued by the debtor or is forgiven as a
contribution to capital; or (4-6-23)
b. The indebtedness consisted of items of a
deductible nature, and the exchange of stock for debt has the same effect as a
cash payment equal to the fair market value of the equity security that is
issued by the debtor or, if the value of the security is less than the value of
the debt, only part of the debt will be excluded. (4-6-23)
