IRS Addresses Ch. 11 Debtor’s Unamortized Debt Issuance Costs When Cancelled in Plan

In a private letter rulingreleased May 18, the Internal Revenue Service addressed the treatment of a Chapter 11 debtor’s unamortized debt issuance costs when the related debt is cancelled or exchanged under its reorganization plan (PLR 201220004).

Chapter 11 Filing.

A taxpayer entered into a series of transactions through which it converted from a C corporation to an S corporation. The taxpayer elected to be taxed as an S corporation under Internal Revenue Code § 1362(a). The taxpayer was an accrual method taxpayer prior to its S election and continues to be an accrual method taxpayer after ...