Family Office Fridays: Taxation of Debt Workouts with Closely Held Passthrough Investments

For certain strategic individuals and family office investors, future deal-making may largely become a story of debt. Whether this topic arises in the form of dealing with current distressed debt maintained in present portfolios, or as a result of analyzing future opportunities for new investments, germane to the overall analysis for the family office may be a need to understand the tax consequences of debt workout arrangements.

The federal income tax rules in this area create a number of potential tax benefits and detriments for a taxpayer to be aware of when structuring a potential transaction. Furthermore, timing may be critical in ensuring certain steps are taken in advance of a looming event. When owners of a passthrough entity are aware that the entity may soon go through a debt workout, the owners may propose certain actions to mitigate against potentially unfavorable tax treatment.

Please join KPMG LLP for a webcast with professionals from our Washington National Tax practice that will discuss the following tax aspects of debt workouts in the context of closely held passthrough entities:

•  Analyzing debt discharge transactions
•  Identifying opportunities for excluding cancellation of debt income
•  Understanding allocations of debt discharge income and deemed distributions
•  Reviewing potential actions to be addressed in advance of a debt workout