Partnership COD income and other debt issues

The law of cancellation of indebtedness has changed recently in ways good and bad. Homeowners facing foreclosure have been provided tax relief, as have corporations and others unable to pay their business loans. Creditors of partnerships, however, have learned that their bad-debt deduction must be deferred if their loan is converted into an equity interest. This Article places the changes to partnerships and their creditors in context by providing an…