Lehman Brothers Financial SA (LEHNQ)

[yx88hc]

All it takes is a simple googling to decide who is right about COD and NOL. Well, I just did that. Conclusion: htm is right, 2good is wrong.

From IRS Tax Map 2013, Publication 908

None of the debt canceled in a bankruptcy case is included in the debtor's gross income in the year it was canceled. Instead, certain losses, credits, and basis of property must be reduced by the amount of excluded income (but not below zero). These losses, credits, and basis in property are called tax attributes and are discussed under Reduction of Tax Attributes, later.

If a debtor excludes canceled debt from income because it is canceled in a bankruptcy case or during insolvency, he or she must use the excluded amount to reduce certain "tax attributes." Tax attributes include the basis of certain assets and the losses and credits listed later. By reducing the tax attributes, the tax on the canceled debt is partially postponed instead of being entirely forgiven. This prevents an excessive tax benefit from the debt cancellation.

Order of reduction.(p26)
Generally, use the amount of canceled debt to reduce the tax attributes in the order listed below.

Net operating loss.(p26)
Reduce any NOL for the tax year in which the debt cancellation takes place, and any NOL carryover to that tax year.

General business credit carryovers.(p26)

Minimum tax credit.(p26)

Capital losses.(p26)

Basis.(p26)

Passive activity loss and credit carryovers.(p26)

Foreign tax credit.(p26)