And...
16. Under section 382(1)(5)(E) of the Tax Code and the Treasury Regulations
promulgated thereunder, a creditor whose claim is exchanged for stock under a chapter 11 plan
or pursuant to an applicable bankruptcy court order is a “qualified creditor” if such claim either
(i) has been owned by such creditor for 18 or more months prior to the date of filing of the
bankruptcy petition or (ii) arose in the ordinary course of the debtor’s business and was at all
times beneficially owned by such creditor. In addition, even creditors that do not satisfy the
necessary holding periods can be “qualified creditors” if their receipt of stock in the reorganized
company pursuant to the chapter 11 plan does not exceed a threshold level.
17. Under Treasury Regulation section 1.382-9(d)(3), a debtor generally may,
for purposes of the section 382(1)(5), “treat indebtedness as always having been owned by the
beneficial owner of the indebtedness immediately before the ownership change if the beneficial
owner is not, immediately after the ownership change, directly or indirectly either a 5%
shareholder or an entity through which a 5% shareholder owns an indirect ownership interest” in
the debtor. Stock ownership is measured in terms of vote and value.
Enjoy,
Coach T
