Internal Revenue Code:Sec. 108. Income from discharge of indebtedness

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Contents


Location in Internal Revenue Code


     TITLE 26 - INTERNAL REVENUE CODE
      Subtitle A - Income Taxes
       CHAPTER 1 - NORMAL TAXES AND SURTAXES
        Subchapter B - Computation of Taxable Income
         PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
       

Statute

    Sec. 108. Income from discharge of indebtedness
 
    (a) Exclusion from gross income
      (1) In general
        Gross income does not include any amount which (but for this
      subsection) would be includible in gross income by reason of the
      discharge (in whole or in part) of indebtedness of the taxpayer
      if -
          (A) the discharge occurs in a title 11 case,
          (B) the discharge occurs when the taxpayer is insolvent,
          (C) the indebtedness discharged is qualified farm
        indebtedness,
          (D) in the case of a taxpayer other than a C corporation, the
        indebtedness discharged is qualified real property business
        indebtedness, or
          (E) the indebtedness discharged is qualified 
        principal residence indebtedness which is discharged 
        before January 1, 2010.
      (2) Coordination of exclusions
        (A) Title 11 exclusion takes precedence
          Subparagraphs (B), (C), (D), and (E) of paragraph (1) shall not
        apply to a discharge which occurs in a title 11 case.
        (B) Insolvency exclusion takes precedence over qualified farm
            exclusion and qualified real property business exclusion
          Subparagraphs (C) and (D) of paragraph (1) shall not apply to
        a discharge to the extent the taxpayer is insolvent.
        (C) Principal residence exclusion takes precedence 
            over insolvency exclusion unless elected otherwise.--
        Paragraph (1)(B) shall not apply to a discharge to which 
        paragraph (1)(E) applies unless the taxpayer elects to 
        apply paragraph (1)(B) in lieu of paragraph (1)(E).
      (3) Insolvency exclusion limited to amount of insolvency
        In the case of a discharge to which paragraph (1)(B) applies,
      the amount excluded under paragraph (1)(B) shall not exceed the
      amount by which the taxpayer is insolvent.
    (b) Reduction of tax attributes
      (1) In general
        The amount excluded from gross income under subparagraph (A),
      (B), or (C) of subsection (a)(1) shall be applied to reduce the
      tax attributes of the taxpayer as provided in paragraph (2).
      (2) Tax attributes affected; order of reduction
        Except as provided in paragraph (5), the reduction referred to
      in paragraph (1) shall be made in the following tax attributes in
      the following order:
        (A) NOL
          Any net operating loss for the taxable year of the discharge,
        and any net operating loss carryover to such taxable year.
        (B) General business credit
          Any carryover to or from the taxable year of a discharge of
        an amount for purposes for determining the amount allowable as
        a credit under section 38 (relating to general business
        credit).
        (C) Minimum tax credit
          The amount of the minimum tax credit available under section
        53(b) as of the beginning of the taxable year immediately
        following the taxable year of the discharge.
        (D) Capital loss carryovers
          Any net capital loss for the taxable year of the discharge,
        and any capital loss carryover to such taxable year under
        section 1212.
        (E) Basis reduction
          (i) In general
            The basis of the property of the taxpayer.
          (ii) Cross reference
            For provisions for making the reduction described in clause
          (i), see section 1017.
        (F) Passive activity loss and credit carryovers
          Any passive activity loss or credit carryover of the taxpayer
        under section 469(b) from the taxable year of the discharge.
        (G) Foreign tax credit carryovers
          Any carryover to or from the taxable year of the discharge
        for purposes of determining the amount of the credit allowable
        under section 27.
      (3) Amount of reduction
        (A) In general
          Except as provided in subparagraph (B), the reductions
        described in paragraph (2) shall be one dollar for each dollar
        excluded by subsection (a).
        (B) Credit carryover reduction
          The reductions described in subparagraphs (B), (C), and (G)
        shall be 33 1/3 cents for each dollar excluded by subsection
        (a). The reduction described in subparagraph (F) in any passive
        activity credit carryover shall be 33 1/3 cents for each dollar
        excluded by subsection (a).
      (4) Ordering rules
        (A) Reductions made after determination of tax for year
          The reductions described in paragraph (2) shall be made after
        the determination of the tax imposed by this chapter for the
        taxable year of the discharge.
        (B) Reductions under subparagraph (A) or (D) of paragraph (2)
          The reductions described in subparagraph (A) or (D) of
        paragraph (2) (as the case may be) shall be made first in the
        loss for the taxable year of the discharge and then in the
        carryovers to such taxable year in the order of the taxable
        years from which each such carryover arose.
        (C) Reductions under subparagraphs (B) and (G) of paragraph (2)
          The reductions described in subparagraphs (B) and (G) of
        paragraph (2) shall be made in the order in which carryovers
        are taken into account under this chapter for the taxable year
        of the discharge.
      (5) Election to apply reduction first against depreciable
          property
        (A) In general
          The taxpayer may elect to apply any portion of the reduction
        referred to in paragraph (1) to the reduction under section
        1017 of the basis of the depreciable property of the taxpayer.
        (B) Limitation
          The amount to which an election under subparagraph (A)
        applies shall not exceed the aggregate adjusted bases of the
        depreciable property held by the taxpayer as of the beginning
        of the taxable year following the taxable year in which the
        discharge occurs.
        (C) Other tax attributes not reduced
          Paragraph (2) shall not apply to any amount to which an
        election under this paragraph applies.
    (c) Treatment of discharge of qualified real property business
        indebtedness
      (1) Basis reduction
        (A) In general
          The amount excluded from gross income under subparagraph (D)
        of subsection (a)(1) shall be applied to reduce the basis of
        the depreciable real property of the taxpayer.
        (B) Cross reference
          For provisions making the reduction described in subparagraph
        (A), see section 1017.
      (2) Limitations
        (A) Indebtedness in excess of value
          The amount excluded under subparagraph (D) of subsection
        (a)(1) with respect to any qualified real property business
        indebtedness shall not exceed the excess (if any) of -
            (i) the outstanding principal amount of such indebtedness
          (immediately before the discharge), over
            (ii) the fair market value of the real property described
          in paragraph (3)(A) (as of such time), reduced by the
          outstanding principal amount of any other qualified real
          property business indebtedness secured by such property (as
          of such time).
        (B) Overall limitation
          The amount excluded under subparagraph (D) of subsection
        (a)(1) shall not exceed the aggregate adjusted bases of
        depreciable real property (determined after any reductions
        under subsections (b) and (g)) held by the taxpayer immediately
        before the discharge (other than depreciable real property
        acquired in contemplation of such discharge).
      (3) Qualified real property business indebtedness
        The term ''qualified real property business indebtedness''
      means indebtedness which -
          (A) was incurred or assumed by the taxpayer in connection
        with real property used in a trade or business and is secured
        by such real property,
          (B) was incurred or assumed before January 1, 1993, or if
        incurred or assumed on or after such date, is qualified
        acquisition indebtedness, and
          (C) with respect to which such taxpayer makes an election to
        have this paragraph apply.
      Such term shall not include qualified farm indebtedness.
      Indebtedness under subparagraph (B) shall include indebtedness
      resulting from the refinancing of indebtedness under subparagraph
      (B) (or this sentence), but only to the extent it does not exceed
      the amount of the indebtedness being refinanced.
      (4) Qualified acquisition indebtedness
        For purposes of paragraph (3)(B), the term ''qualified
      acquisition indebtedness'' means, with respect to any real
      property described in paragraph (3)(A), indebtedness incurred or
      assumed to acquire, construct, reconstruct, or substantially
      improve such property.
      (5) Regulations
        The Secretary shall issue such regulations as are necessary to
      carry out this subsection, including regulations preventing the
      abuse of this subsection through cross-collateralization or other
      means.
    (d) Meaning of terms; special rules relating to certain provisions
      (1) Indebtedness of taxpayer
        For purposes of this section, the term ''indebtedness of the
      taxpayer'' means any indebtedness -
          (A) for which the taxpayer is liable, or
          (B) subject to which the taxpayer holds property.
      (2) Title 11 case
        For purposes of this section, the term ''title 11 case'' means
      a case under title 11 of the United States Code (relating to
      bankruptcy), but only if the taxpayer is under the jurisdiction
      of the court in such case and the discharge of indebtedness is
      granted by the court or is pursuant to a plan approved by the
      court.
      (3) Insolvent
        For purposes of this section, the term ''insolvent'' means the
      excess of liabilities over the fair market value of assets.  With
      respect to any discharge, whether or not the taxpayer is
      insolvent, and the amount by which the taxpayer is insolvent,
      shall be determined on the basis of the taxpayer's assets and
      liabilities immediately before the discharge.
      ((4) Repealed. Pub. L. 99-514, title VIII, Sec. 822(b)(3)(A),
          Oct. 22, 1986, 100 Stat. 2373)
      (5) Depreciable property
        The term ''depreciable property'' has the same meaning as when
      used in section 1017.
      (6) Certain provisions to be applied at partner level
        In the case of a partnership, subsections (a), (b), (c), and
      (g) shall be applied at the partner level.
      (7) Special rules for S corporation
        (A) Certain provisions to be applied at corporate level
          In the case of an S corporation, subsections (a), (b), (c),
        and (g) shall be applied at the corporate level, including by not 
        taking into account under section 1366(a) any amount excluded under 
        subsection (a) of this section.
            [<<NOTE: Applicability.>>  In general.--Except as 
             provided in paragraph (2), the amendment made to this section 
             by P.L. 107-147 shall apply to discharges of indebtedness after 
             October 11, 2001, in taxable years ending after such date.
             Exception.--The amendment made to this section shall not 
             apply to any discharge of indebtedness before March 1, 2002, 
            pursuant to a plan of reorganization filed with a bankruptcy 
            court on or before October 11, 2001.]
 
        (B) Reduction in carryover of disallowed losses and deductions
          In the case of an S corporation, for purposes of subparagraph
        (A) of subsection (b)(2), any loss or deduction which is
        disallowed for the taxable year of the discharge under section
        1366(d)(1) shall be treated as a net operating loss for such
        taxable year.  The preceding sentence shall not apply to any
        discharge to the extent that subsection (a)(1)(D) applies to
        such discharge.
        (C) Coordination with basis adjustments under section
            1367(b)(2)
          For purposes of subsection (e)(6), a shareholder's adjusted
        basis in indebtedness of an S corporation shall be determined
        without regard to any adjustments made under section
        1367(b)(2).
      (8) Reductions of tax attributes in title 11 cases of individuals
          to be made by estate
        In any case under chapter 7 or 11 of title 11 of the United
      States Code to which section 1398 applies, for purposes of
      paragraphs (1) and (5) of subsection (b) the estate (and not the
      individual) shall be treated as the taxpayer.  The preceding
      sentence shall not apply for purposes of applying section 1017 to
      property transferred by the estate to the individual.
      (9) Time for making election, etc.
        (A) Time
          An election under paragraph (5) of subsection (b) or under
        paragraph (3)(C) of subsection (c) shall be made on the
        taxpayer's return for the taxable year in which the discharge
        occurs or at such other time as may be permitted in regulations
        prescribed by the Secretary.
        (B) Revocation only with consent
          An election referred to in subparagraph (A), once made, may
        be revoked only with the consent of the Secretary.
        (C) Manner
          An election referred to in subparagraph (A) shall be made in
        such manner as the Secretary may by regulations prescribe.
      (10) Cross reference
          For provision that no reduction is to be made in the basis of
        exempt property of an individual debtor, see section
        1017(c)(1).
    (e) General rules for discharge of indebtedness (including
        discharges not in title 11 cases or insolvency)
      For purposes of this title -
      (1) No other insolvency exception
        Except as otherwise provided in this section, there shall be no
      insolvency exception from the general rule that gross income
      includes income from the discharge of indebtedness.
      (2) Income not realized to extent of lost deductions
        No income shall be realized from the discharge of indebtedness
      to the extent that payment of the liability would have given rise
      to a deduction.
      (3) Adjustments for unamortized premium and discount
        The amount taken into account with respect to any discharge
      shall be properly adjusted for unamortized premium and
      unamortized discount with respect to the indebtedness discharged.
      (4) Acquisition of indebtedness by person related to debtor
        (A) Treated as acquisition by debtor
          For purposes of determining income of the debtor from
        discharge of indebtedness, to the extent provided in
        regulations prescribed by the Secretary, the acquisition of
        outstanding indebtedness by a person bearing a relationship to
        the debtor specified in section 267(b) or 707(b)(1) from a
        person who does not bear such a relationship to the debtor
        shall be treated as the acquisition of such indebtedness by the
        debtor.  Such regulations shall provide for such adjustments in
        the treatment of any subsequent transactions involving the
        indebtedness as may be appropriate by reason of the application
        of the preceding sentence.
        (B) Members of family
          For purposes of this paragraph, sections 267(b) and 707(b)(1)
        shall be applied as if section 267(c)(4) provided that the
        family of an individual consists of the individual's spouse,
        the individual's children, grandchildren, and parents, and any
        spouse of the individual's children or grandchildren.
        (C) Entities under common control treated as related
          For purposes of this paragraph, two entities which are
        treated as a single employer under subsection (b) or (c) of
        section 414 shall be treated as bearing a relationship to each
        other which is described in section 267(b).
      (5) Purchase-money debt reduction for solvent debtor treated as
          price reduction
        If -
          (A) the debt of a purchaser of property to the seller of such
        property which arose out of the purchase of such property is
        reduced,
          (B) such reduction does not occur -
            (i) in a title 11 case, or
            (ii) when the purchaser is insolvent, and
          (C) but for this paragraph, such reduction would be treated
        as income to the purchaser from the discharge of indebtedness,
      then such reduction shall be treated as a purchase price
      adjustment.
      (6) Indebtedness contributed to capital
        Except as provided in regulations, for purposes of determining
      income of the debtor from discharge of indebtedness, if a debtor
      corporation acquires its indebtedness from a shareholder as a
      contribution to capital -
          (A) section 118 shall not apply, but
          (B) such corporation shall be treated as having satisfied the
        indebtedness with an amount of money equal to the shareholder's
        adjusted basis in the indebtedness.
      (7) Recapture of gain on subsequent sale of stock
        (A) In general
          If a creditor acquires stock of a debtor corporation in
        satisfaction of such corporation's indebtedness, for purposes
        of section 1245 -
            (i) such stock (and any other property the basis of which
          is determined in whole or in part by reference to the
          adjusted basis of such stock) shall be treated as section
          1245 property,
            (ii) the aggregate amount allowed to the creditor -
              (I) as deductions under subsection (a) or (b) of section
            166 (by reason of the worthlessness or partial
            worthlessness of the indebtedness), or
              (II) as an ordinary loss on the exchange,
         shall be treated as an amount allowed as a deduction for
          depreciation, and
            (iii) an exchange of such stock qualifying under section
          354(a), 355(a), or 356(a) shall be treated as an exchange to
          which section 1245(b)(3) applies.
        The amount determined under clause (ii) shall be reduced by the
        amount (if any) included in the creditor's gross income on the
        exchange.
        (B) Special rule for cash basis taxpayers
          In the case of any creditor who computes his taxable income
        under the cash receipts and disbursements method, proper
        adjustment shall be made in the amount taken into account under
        clause (ii) of subparagraph (A) for any amount which was not
        included in the creditor's gross income but which would have
        been included in such gross income if such indebtedness had
        been satisfied in full.
        (C) Stock of parent corporation
          For purposes of this paragraph, stock of a corporation in
        control (within the meaning of section 368(c)) of the debtor
        corporation shall be treated as stock of the debtor
        corporation.
        (D) Treatment of successor corporation
          For purposes of this paragraph, the term ''debtor
        corporation'' includes a successor corporation.
        (E) Partnership rule
          Under regulations prescribed by the Secretary, rules similar
        to the rules of the foregoing subparagraphs of this paragraph
        shall apply with respect to the indebtedness of a partnership.

      (8) Indebtedness satisfied by corporate stock or 
        partnership interest.--For purposes of determining income of a 
        debtor from discharge of indebtedness, if--
         (A) a debtor corporation transfers stock, or
         (B) a debtor partnership transfers a capital or 
             profits interest in such partnership,
        to a creditor in satisfaction of its recourse or nonrecourse 
        indebtedness, such corporation or partnership shall be treated 
        as having satisfied the indebtedness with an amount of money 
        equal to the fair market value of the stock or interest. In the 
        case of any partnership, any discharge of indebtedness income 
        recognized under this paragraph shall be included in the 
        distributive shares of taxpayers which were the partners in the 
        partnership immediately before such discharge.

      (9) Discharge of indebtedness income not taken into account in
          determining whether entity meets REIT qualifications
        Any amount included in gross income by reason of the discharge
      of indebtedness shall not be taken into account for purposes of
      paragraphs (2) and (3) of section 856(c).
      (10) Indebtedness satisfied by issuance of debt instrument
        (A) In general
          For purposes of determining income of a debtor from discharge
        of indebtedness, if a debtor issues a debt instrument in
        satisfaction of indebtedness, such debtor shall be treated as
        having satisfied the indebtedness with an amount of money equal
        to the issue price of such debt instrument.
        (B) Issue price
          For purposes of subparagraph (A), the issue price of any debt
        instrument shall be determined under sections 1273 and 1274.
        For purposes of the preceding sentence, section 1273(b)(4)
        shall be applied by reducing the stated redemption price of any
        instrument by the portion of such stated redemption price which
        is treated as interest for purposes of this chapter.
    (f) Student loans
      (1) In general
        In the case of an individual, gross income does not include any
      amount which (but for this subsection) would be includible in
      gross income by reason of the discharge (in whole or in part) of
      any student loan if such discharge was pursuant to a provision of
      such loan under which all or part of the indebtedness of the
      individual would be discharged if the individual worked for a
      certain period of time in certain professions for any of a broad
      class of employers.
      (2) Student loan
        For purposes of this subsection, the term ''student loan''
      means any loan to an individual to assist the individual in
      attending an educational organization described in section
      170(b)(1)(A)(ii) made by -
          (A) the United States, or an instrumentality or agency
        thereof,
          (B) a State, territory, or possession of the United States,
        or the District of Columbia, or any political subdivision
        thereof,
          (C) a public benefit corporation -
            (i) which is exempt from taxation under section 501(c)(3),
            (ii) which has assumed control over a State, county, or
          municipal hospital, and
            (iii) whose employees have been deemed to be public
          employees under State law, or
          (D) any educational organization described in section
        170(b)(1)(A)(ii) if such loan is made -
            (i) pursuant to an agreement with any entity described in
          subparagraph (A), (B), or (C) under which the funds from
          which the loan was made were provided to such educational
          organization, or
            (ii) pursuant to a program of such educational organization
          which is designed to encourage its students to serve in
          occupations with unmet needs or in areas with unmet needs and
          under which the services provided by the students (or former
          students) are for or under the direction of a governmental
          unit or an organization described in section 501(c)(3) and
          exempt from tax under section 501(a).
      The term ''student loan'' includes any loan made by an
      educational organization described in section 170(b)(1)(A)(ii) or
      by an organization exempt from tax under section 501(a) to
      refinance a loan to an individual to assist the individual in
      attending any such educational organization but only if the
      refinancing loan is pursuant to a program of the refinancing
      organization which is designed as described in subparagraph
      (D)(ii).
      (3) Exception for discharges on account of services performed for
          certain lenders
        Paragraph (1) shall not apply to the discharge of a loan made
        by an organization described in paragraph (2)(D) if the discharge
        is on account of services performed for either such organization.
      (4) Payments under national health service corps loan 
        repayment program and certain state loan repayment programs.--In 
        the case of an individual, gross income shall not include any 
        amount received under section 338B(g) of the Public Health 
        Service Act or under a State program described in section 338I 
        of such Act.
    (g) Special rules for discharge of qualified farm indebtedness
      (1) Discharge must be by qualified person
        (A) In general
          Subparagraph (C) of subsection (a)(1) shall apply only if the
        discharge is by a qualified person.
        (B) Qualified person
          For purposes of subparagraph (A), the term ''qualified
        person'' has the meaning given to such term by section
        49(a)(1)(D)(iv); except that such term shall include any
        Federal, State, or local government or agency or
        instrumentality thereof.
      (2) Qualified farm indebtedness
        For purposes of this section, indebtedness of a taxpayer shall
      be treated as qualified farm indebtedness if -
          (A) such indebtedness was incurred directly in connection
        with the operation by the taxpayer of the trade or business of
        farming, and
          (B) 50 percent or more of the aggregate gross receipts of the
        taxpayer for the 3 taxable years preceding the taxable year in
        which the discharge of such indebtedness occurs is attributable
        to the trade or business of farming.
      (3) Amount excluded cannot exceed sum of tax attributes and
          business and investment assets
        (A) In general
          The amount excluded under subparagraph (C) of subsection
        (a)(1) shall not exceed the sum of -
            (i) the adjusted tax attributes of the taxpayer, and
            (ii) the aggregate adjusted bases of qualified property
          held by the taxpayer as of the beginning of the taxable year
          following the taxable year in which the discharge occurs.
        (B) Adjusted tax attributes
          For purposes of subparagraph (A), the term ''adjusted tax
        attributes'' means the sum of the tax attributes described in
        subparagraphs (A), (B), (C), (D), (F), and (G) of subsection
        (b)(2) determined by taking into account $3 for each $1 of the
        attributes described in subparagraphs (B), (C), and (G) of
        subsection (b)(2) and the attribute described in subparagraph
        (F) of subsection (b)(2) to the extent attributable to any
        passive activity credit carryover.
        (C) Qualified property
          For purposes of this paragraph, the term ''qualified
        property'' means any property which is used or is held for use
        in a trade or business or for the production of income.
        (D) Coordination with insolvency exclusion
          For purposes of this paragraph, the adjusted basis of any
        qualified property and the amount of the adjusted tax
        attributes shall be determined after any reduction under
        subsection (b) by reason of amounts excluded from gross income
        under subsection (a)(1)(B).
    (h) Special Rules Relating to Qualified Principal Residence 
      Indebtedness.--
            (1) Basis reduction.--The amount excluded from gross 
        income by reason of subsection (a)(1)(E) shall be applied to 
        reduce (but not below zero) the basis of the principal residence 
        of the taxpayer.
            (2) Qualified principal residence indebtedness.--For 
        purposes of this section, the term `qualified principal 
        residence indebtedness' means acquisition indebtedness (within 
        the meaning of section 163(h)(3)(B), applied by substituting 
        `$2,000,000 ($1,000,000' for `$1,000,000 ($500,000' in clause 
        (ii) thereof) with respect to the principal residence of the 
        taxpayer.
            (3) Exception for certain discharges not related to 
        taxpayer's financial condition.--Subsection (a)(1)(E) shall not 
        apply to the discharge of a loan if the discharge is on account 
        of services performed for the lender or any other factor not 
        directly related to a decline in the value of the residence or 
        to the financial condition of the taxpayer.
            (4) Ordering rule.--If any loan is discharged, in whole or 
        in part, and only a portion of such loan is qualified principal 
        residence indebtedness, subsection (a)(1)(E) shall apply only to 
        so much of the amount discharged as exceeds the amount
        of the loan (as determined immediately before such discharge) 
        which is not qualified principal residence indebtedness.
            (5) Principal residence.--For purposes of this subsection, 
        the term `principal residence' has the same meaning as when used 
        in section 121.
 

Sources

    (Aug. 16, 1954, ch. 736, 68A Stat. 32; June 29, 1956, ch. 463, Sec.
    5, 70 Stat. 403; Pub. L. 88-496, Sec. 1(a), June 8, 1960, 74 Stat.
    164; Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A), 1951(b)(2)(A),
    Oct. 4, 1976, 90 Stat. 1834, 1836; Pub. L. 96-589, Sec. 2(a), Dec.
    24, 1980, 94 Stat. 3389; Pub. L. 97-354, Sec. 3(e), Oct. 19, 1982,
    96 Stat. 1689; Pub. L. 97-448, title I, Sec. 102(h)(1), title III,
    Sec. 304(d), Jan. 12, 1983, 96 Stat. 2372, 2398; Pub. L. 98-369,
    div.  A, title I, Sec. 59(a), (b)(1), title IV, Sec. 474(r)(5),
    title VII, Sec. 721(b)(2), title X, Sec. 1076(a), July 18, 1984, 98
    Stat. 576, 839, 966, 1053; Pub. L. 99-514, title I, Sec. 104(b)(2),
    title II, Sec. 231(d)(3)(D), title IV, Sec. 405(a), title VI, Sec.
    621(e)(1), title VIII, Sec. 805(c)(2)-(4), 822(a), (b)(1)-(3),
    title XI, Sec. 1171(b)(4), title XVIII, Sec. 1847(b)(7), Oct. 22,
    1986, 100 Stat. 2105, 2179, 2224, 2266, 2362, 2373, 2513, 2856;
    Pub. L. 100-647, title I, Sec. 1004(a)(1)-(4), (6), Nov. 10, 1988,
    102 Stat. 3385, 3387; Pub. L. 101-508, title XI, Sec. 11325(a)(1),
    (b), 11813(b)(6), Nov. 5, 1990, 104 Stat. 1388-466, 1388-551; Pub.
    L. 103-66, title XIII, Sec. 13150(a)-(c)(5), 13226(a)(1), (2)(B),
    (b)(1)-(3), Aug. 10, 1993, 107 Stat. 446-448, 487, 488; Pub. L.
    104-188, title I, Sec. 1703(n)(2), Aug. 20, 1996, 110 Stat. 1877;
    Pub. L. 105-34, title II, Sec. 225(a), Aug. 5, 1997, 111 Stat. 820;
    Pub. L. 105-206, title VI, Sec. 6004(f), July 22, 1998, 112 Stat.
    795.)
 

Miscellaneous

                                 AMENDMENTS

     2007 - P.L. 110-142
SECTION 1. <<NOTE: 26 USC 1 note.>> SHORT TITLE.
    This Act may be cited as the ``Mortgage Forgiveness Debt Relief Act 
of 2007''.
SEC. 2. DISCHARGES OF INDEBTEDNESS ON PRINCIPAL RESIDENCE EXCLUDED FROM 
            GROSS INCOME.
    (a) In General.--Paragraph (1) of section 108(a) of the Internal 
Revenue Code of 1986 is <<NOTE: 26 USC 108.>> amended by striking ``or'' 
at the end of subparagraph (C), by striking the period at the end of 
subparagraph (D) and inserting ``, or'', and by inserting after 
subparagraph (D) the following new subparagraph:
                    ``(E) the indebtedness discharged is qualified 
                principal residence indebtedness which is discharged 
                before January 1, 2010.''.
    (b) Special Rules Relating to Qualified Principal Residence 
Indebtedness.--Section 108 of such Code is amended by adding at the end 
the following new subsection:
    ``(h) Special Rules Relating to Qualified Principal Residence 
Indebtedness.--
            ``(1) Basis reduction.--The amount excluded from gross 
        income by reason of subsection (a)(1)(E) shall be applied to 
        reduce (but not below zero) the basis of the principal residence 
        of the taxpayer.
            ``(2) Qualified principal residence indebtedness.--For 
        purposes of this section, the term `qualified principal 
        residence indebtedness' means acquisition indebtedness (within 
        the meaning of section 163(h)(3)(B), applied by substituting 
        `$2,000,000 ($1,000,000' for `$1,000,000 ($500,000' in clause 
        (ii) thereof) with respect to the principal residence of the 
        taxpayer.
            ``(3) Exception for certain discharges not related to 
        taxpayer's financial condition.--Subsection (a)(1)(E) shall not 
        apply to the discharge of a loan if the discharge is on account 
        of services performed for the lender or any other factor not 
        directly related to a decline in the value of the residence or 
        to the financial condition of the taxpayer.
            ``(4) Ordering rule.--If any loan is discharged, in whole or 
        in part, and only a portion of such loan is qualified principal 
        residence indebtedness, subsection (a)(1)(E) shall apply only to 
        so much of the amount discharged as exceeds the amount
        of the loan (as determined immediately before such discharge) 
        which is not qualified principal residence indebtedness.
            ``(5) Principal residence.--For purposes of this subsection, 
        the term `principal residence' has the same meaning as when used 
        in section 121.''.
    (c) Coordination.--
            (1) Subparagraph (A) of section 108(a)(2) <<NOTE: 26 USC 
        108.>> of such Code is amended by striking ``and (D)'' and 
        inserting ``(D), and (E)''.
            (2) Paragraph (2) of section 108(a) of such Code is amended 
        by adding at the end the following new subparagraph:
                    ``(C) Principal residence exclusion takes precedence 
                over insolvency exclusion unless elected otherwise.--
                Paragraph (1)(B) shall not apply to a discharge to which 
                paragraph (1)(E) applies unless the taxpayer elects to 
                apply paragraph (1)(B) in lieu of paragraph (1)(E).''.
    
     2005 - P.L. 109-73
SEC. 401. EXCLUSIONS OF CERTAIN CANCELLATIONS OF INDEBTEDNESS BY REASON 
            OF HURRICANE KATRINA.

    (a) In General.--For purposes of the Internal Revenue Code of 1986, 
gross income shall not include any amount which (but for this section) 
would be includible in gross income by reason of the discharge (in whole 
or in part) of indebtedness of a natural person described in subsection 
(b) by an applicable entity (as defined in section 6050P(c)(1) of such 
Code).
    (b) Persons Described.--A natural person is described in this 
subsection if the principal place of abode of such person on August 25, 
2005, was located--
            (1) in the core disaster area, or
            (2) in the Hurricane Katrina disaster area (but outside the 
        core disaster area) and such person suffered economic loss by 
        reason of Hurricane Katrina.

    (c) Exceptions.--
            (1) Business indebtedness.--Subsection (a) shall not apply 
        to any indebtedness incurred in connection with a trade or 
        business.
            (2) Real property outside core disaster area.--Subsection 
        (a) shall not apply to any discharge of indebtedness to the 
        extent that real property constituting security for such 
        indebtedness is located outside of the Hurricane Katrina 
        disaster area.

    (d) Denial of Double Benefit.--For purposes of the Internal Revenue 
Code of 1986, the amount excluded from gross income under subsection (a) 
shall be treated in the same manner as an amount excluded under section 
108(a) of such Code.
    
     2004 - Subsec.896(a),Pub.L.108-357, amended Sec.108-357(e)
     by amending paragraph (8).
     2004 - Pub.L. 108-357, Sec 320(a).  Section 108(f) (relating to student
     loans) is amended by adding at the end the new paragraph (4).
     Effective Date.--The <<NOTE: 26 USC 108 note.>> amendments made 
     by this section shall apply to amounts received by an individual in 
     taxable years beginning after December 31, 2003.

      2002 - Subsec. (d)(7)(A). Pub. L. 107-147, Sec. 402, amended
       by inserting before the period ``, including by not 
       taking into account under section 1366(a) any amount excluded under 
       subsection (a) of this section''.
        <<NOTE: Applicability.>>  In general.--Except as 
        provided in paragraph (2), the amendment made by this section 
        shall apply to discharges of indebtedness after October 11, 
        2001, in taxable years ending after such date.
        Exception.--The amendment made by this section shall not 
        apply to any discharge of indebtedness before March 1, 2002, 
        pursuant to a plan of reorganization filed with a bankruptcy 
        court on or before October 11, 2001.

      1998 - Subsec. (f)(2). Pub. L. 105-206, Sec. 6004(f)(1), amended
    concluding provisions generally.  Prior to amendment, concluding
    provisions read as follows: ''The term 'student loan' includes any
    loan made by an educational organization so described or by an
    organization exempt from tax under section 501(a) to refinance a
    loan meeting the requirements of the preceding sentence.''
      Subsec. (f)(3). Pub. L. 105-206, Sec. 6004(f)(2), struck out
    ''(or by an organization described in paragraph (2)(E) from funds
    provided by an organization described in paragraph (2)(D))'' after
    ''paragraph (2)(D)''.
      1997 - Subsec. (f)(2). Pub. L. 105-34, Sec. 225(a)(1), added
    subpar. (D) and concluding provisions and struck out former subpar.
    (D) which read as follows: ''any educational organization so
    described pursuant to an agreement with any entity described in
    subparagraph (A), (B), or (C) under which the funds from which the
    loan was made were provided to such educational organization.''
      Subsec. (f)(2)(B). Pub. L. 105-34, Sec. 225(a)(1), struck out
    ''or'' at end.
      Subsec. (f)(3). Pub. L. 105-34, Sec. 225(a)(2), added par. (3).
      1996 - Subsec. (d)(9)(A). Pub. L. 104-188 substituted ''paragraph
    (3)(C)'' for ''paragraph (3)(B)''.
      1993 - Subsec. (a)(1)(D). Pub. L. 103-66, Sec. 13150(a), added
    subpar. (D).
      Subsec. (a)(2)(A). Pub. L. 103-66, Sec. 13150(c)(1), substituted
    '', (C), and (D)'' for ''and (C)''.
      Subsec. (a)(2)(B). Pub. L. 103-66, Sec. 13150(c)(2), amended
    heading and text of subpar. (B) generally.  Prior to amendment,
    text read as follows: ''Subparagraph (C) of paragraph (1) shall not
    apply to a discharge to the extent the taxpayer is insolvent.''
      Subsec. (b)(2)(C) to (E). Pub. L. 103-66, Sec. 13226(b)(1), added
    subpar. (C) and redesignated former subpars. (C) and (D) as (D) and
    (E), respectively.  Former subpar. (E) redesignated (F).
      Subsec. (b)(2)(F). Pub. L. 103-66, Sec. 13226(b)(2), added
    subpar. (F). Former subpar. (F) redesignated (G).
      Pub. L. 103-66, Sec. 13226(b)(1), redesignated subpar. (E) as
    (F).
      Subsec. (b)(2)(G). Pub. L. 103-66, Sec. 13226(b)(2), redesignated
    subpar. (F) as (G).
      Subsec. (b)(3)(B). Pub. L. 103-66, Sec. 13226(b)(3)(A), amended
    heading and text of subpar. (B) generally.  Prior to amendment,
    text read as follows: ''The reductions described in subparagraphs
    (B) and (E) of paragraph (2) shall be 33 1/3 cents for each dollar
    excluded by subsection (a).''
      Subsec. (b)(4)(B). Pub. L. 103-66, Sec. 13226(b)(3)(B),
    substituted ''(D)'' for ''(C)'' in heading and text.
      Subsec. (b)(4)(C). Pub. L. 103-66, Sec. 13226(b)(3)(C),
    substituted ''(G)'' for ''(E)'' in heading and text.
      Subsec. (c). Pub. L. 103-66, Sec. 13150(b), added subsec. (c).
      Subsec. (d). Pub. L. 103-66, Sec. 13150(c)(3)(B), substituted
    ''certain provisions'' for ''subsections (a), (b) and (g)'' in
    heading.
      Subsec. (d)(6), (7)(A). Pub. L. 103-66, Sec. 13150(c)(3)(A), (C),
    substituted ''Certain provisions'' for ''Subsections (a), (b) and
    (g)'' in heading and ''subsections (a), (b), (c), and (g)'' for
    ''subsections (a), (b), and (g)'' in text.
      Subsec. (d)(7)(B). Pub. L. 103-66, Sec. 13150(c)(4), inserted at
    end ''The preceding sentence shall not apply to any discharge to
    the extent that subsection (a)(1)(D) applies to such discharge.''
      Subsec. (d)(9)(A). Pub. L. 103-66, Sec. 13150(c)(5), inserted
    ''or under paragraph (3)(B) of subsection (c)'' after ''subsection
    (b)''.
      Subsec. (e)(6). Pub. L. 103-66, Sec. 13226(a)(2)(B), substituted
    ''Except as provided in regulations, for'' for ''For''.
      Subsec. (e)(8). Pub. L. 103-66, Sec. 13226(a)(1)(B), amended
    heading and text of par. (8) generally.  Prior to amendment, text
    read as follows: ''For purposes of determining income of the debtor
    from discharge of indebtedness, the stock for debt exception shall
    not apply -
        ''(A) to the issuance of nominal or token shares, or
        ''(B) with respect to an unsecured creditor, where the ratio of
      the value of the stock received by such unsecured creditor to the
      amount of his indebtedness cancelled or exchanged for stock in
      the workout is less than 50 percent of a similar ratio computed
      for all unsecured creditors participating in the workout.
    Any stock which is disqualified stock (as defined in paragraph
    (10)(B)(ii)) shall not be treated as stock for purposes of this
    paragraph.''
      Subsec. (e)(10), (11). Pub. L. 103-66, Sec. 13226(a)(1)(A),
    redesignated par. (11) as (10) and struck out former par. (10)
    which related to satisfaction of indebtedness by transfer of
    corporation's stock.
      Subsec. (g)(3)(B). Pub. L. 103-66, Sec. 13226(b)(3)(D),
    substituted ''subparagraphs (A), (B), (C), (D), (F), and (G)'' for
    ''subparagraphs (A), (B), (C), and (E)'' and ''subparagraphs (B),
    (C), and (G)'' for ''subparagraphs (B) and (E)'' and inserted
    before period at end ''and the attribute described in subparagraph
    (F) of subsection (b)(2) to the extent attributable to any passive
    activity credit carryover''.
      1990 - Subsec. (e)(8). Pub. L. 101-508, Sec. 11325(b)(2),
    inserted provision at end that any stock which is a disqualified
    stock, as so defined, not be treated as stock for purposes of this
    paragraph.
      Subsec. (e)(10)(B). Pub. L. 101-508, Sec. 11325(b)(1),
    substituted heading for one which read: ''Exception for title 11
    cases and insolvent debtors'' and amended text generally.  Prior to
    amendment, text read as follows: ''Subparagraph (A) shall not apply
    in the case of a debtor in a title 11 case or to the extent the
    debtor is insolvent.''
      Subsec. (e)(11). Pub. L. 101-508, Sec. 11325(a)(1), added par.
    (11).
      Subsec. (g)(1)(B). Pub. L. 101-508, Sec. 11813(b)(6), substituted
    ''section 49(a)(1)(D)(iv)'' for ''section 46(c)(8)(D)(iv)''.
      1988 - Subsec. (a)(1)(C). Pub. L. 100-647, Sec. 1004(a)(1), added
    subpar. (C).
      Subsec. (a)(2). Pub. L. 100-647, Sec. 1004(a)(2), amended par.
    (2) generally.  Prior to amendment, par. (2) read as follows:
    ''Subparagraph (B) of paragraph (1) shall not apply to a discharge
    which occurs in a title 11 case.''
      Subsec. (b). Pub. L. 100-647, Sec. 1004(a)(3), struck out ''in
    title 11 case or insolvency'' after ''Reduction of tax attributes''
    in heading and substituted ''subparagraph (A), (B), or (C)'' for
    ''subparagraph (A) or (B)'' in text of par. (1).
      Subsec. (d). Pub. L. 100-647, Sec. 1004(a)(6)(B), which directed
    amendment of subsec. (d) heading by substituting ''subsections (a),
    (b), and (g)'' for ''subsections (a), and (b)'', was executed by
    making the substitution for ''subsections (a) and (b)'' as the
    probable intent of Congress.
      Subsec. (d)(6). Pub. L. 100-647, Sec. 1004(a)(6)(A), (C),
    substituted ''Subsections (a), (b), and (g)'' for ''Subsections (a)
    and (b)'' in heading and ''subsections (a), (b), and (g)'' for
    ''subsections (a) and (b)'' in text.
      Subsec. (d)(7)(A). Pub. L. 100-647, Sec. 1004(a)(6)(A), (C),
    substituted ''Subsections (a), (b), and (g)'' for ''Subsections (a)
    and (b)'' in heading and ''subsections (a), (b), and (g)'' for
    ''subsections (a) and (b)'' in text.
      Subsec. (g). Pub. L. 100-647, Sec. 1004(a)(4), substituted
    ''indebtedness'' for ''indebtedness of solvent farmers'' in heading
    and amended text generally.  Prior to amendment, text read as
    follows:
      ''(1) In general. - For purposes of this section and section
    1017, the discharge by a qualified person of qualified farm
    indebtedness of a taxpayer who is not insolvent at the time of the
    discharge shall be treated in the same manner as if the discharge
    had occurred when the taxpayer was insolvent.
      ''(2) Qualified farm indebtedness. - For purposes of this
    subsection, indebtedness of a taxpayer shall be treated as
    qualified farm indebtedness if -
        ''(A) such indebtedness was incurred directly in connection
      with the operation by the taxpayer of the trade or business of
      farming, and
        ''(B) 50 percent or more of the average annual gross receipts
      of the taxpayer for the 3 taxable years preceding the taxable
      year in which the discharge of such indebtedness occurs is
      attributable to the trade or business of farming.
      ''(3) Qualified person. - For purposes of this subsection, the
    term 'qualified person' means a person described in section
    46(c)(8)(D)(iv).''
      1986 - Subsec. (a)(1)(C). Pub. L. 99-514, Sec. 822(a), struck out
    subpar. (C) relating to exclusion from gross income if the
    indebtedness discharged is qualified business indebtedness.
      Subsec. (a)(2). Pub. L. 99-514, Sec. 822(b)(1), substituted
    ''Subparagraph (B) of paragraph (1)'' for ''Subparagraphs (B) and
    (C) of paragraph (1)'' in subpar. (A), struck out subpar. (A)
    designation and heading, and struck out subpar. (B) providing that
    insolvency exclusion takes precedence over qualified business
    exclusion.
      Subsec. (b)(2)(B). Pub. L. 99-514, Sec. 231(d)(3)(D), substituted
    ''General business credit'' for ''Research credit and general
    business credit'' in heading and amended text, as amended by this
    Act (Pub. L. 99-514, Sec. 1171(b)(4) (see below)), generally.
    Prior to amendment, text read as follows: ''Any carryover to or
    from the taxable year of a discharge of an amount for purposes of
    determining the amount allowable as a credit under -
        ''(i) section 30 (relating to credit for increasing research
      activities), or
        ''(ii) section 38 (relating to general business credit).
    For purposes of this subparagraph, there shall not be taken into
    account any portion of a carryover which is attributable to the
    employee stock ownership credit determined under section 41.''
      Pub. L. 99-514, Sec. 1171(b)(4), struck out last sentence which
    had been eliminated by the general amendment of subpar. (B) by Pub.
    L. 99-514, Sec. 231(d)(3)(D). See above.
      Subsec. (b)(2)(E). Pub. L. 99-514, Sec. 1847(b)(7), substituted
    ''section 27'' for ''section 33''.
      Subsec. (b)(3). Pub. L. 99-514, Sec. 104(b)(2), substituted ''33
    1/3 cents'' for ''50 cents''.
      Subsec. (c). Pub. L. 99-514, Sec. 822(b)(2), struck out subsec.
    (c) relating to tax treatment of discharge of qualified business
    indebtedness.
      Subsec. (d). Pub. L. 99-514, Sec. 822(b)(3)(B), struck out
    reference to subsec. (c) in heading.
      Subsec. (d)(4). Pub. L. 99-514, Sec. 822(b)(3)(A), struck out
    par. (4) relating to treatment of indebtedness as qualified
    business indebtedness.
      Subsec. (d)(6), (7)(A). Pub. L. 99-514, Sec. 822(b)(3)(B), struck
    out reference to subsec. (c) in heading and text.
      Subsec. (d)(7)(B). Pub. L. 99-514, Sec. 822(b)(3)(C), struck out
    ''The preceding sentence shall not apply to any discharge to the
    extent that subsection (a)(1)(C) applies to such discharge.''
      Subsec. (d)(9)(A). Pub. L. 99-514, Sec. 822(b)(3)(D), struck out
    ''under paragraph (4) of this subsection or'' after ''An
    election''.
      Subsec. (e)(7)(A)(ii)(I). Pub. L. 99-514, Sec. 805(c)(2),
    substituted ''subsection (a) or (b) of section 166'' for
    ''subsection (a), (b), or (c) of section 166''.
      Subsec. (e)(7)(B) to (D). Pub. L. 99-514, Sec. 805(c)(3),
    redesignated subpars. (C) to (E) as (B) to (D), respectively, and
    struck out former subpar. (B) which related to taxpayers on reserve
    method.
      Subsec. (e)(7)(E), (F). Pub. L. 99-514, Sec. 805(c)(3), (4),
    redesignated subpar. (F) as (E) and substituted ''the foregoing
    subparagraphs'' for ''subparagraphs (A), (B), (C), (D), and (E)''.
    Former subpar. (E) redesignated (D).
      Subsec. (e)(10)(C). Pub. L. 99-514, Sec. 621(e), repealed the
    amendment by Pub. L. 98-369, Sec. 59(b)(1), which had added subpar.
    (C) creating an exception for transfers in certain workouts of the
    satisfaction of indebtedness by corporation's stock.  See 1984
    Amendment note below.
      Subsec. (g). Pub. L. 99-514, Sec. 405(a), added subsec. (g).
      1984 - Subsec. (b)(2)(B). Pub. L. 98-369, Sec. 474(r)(5),
    substituted provisions relating to research credits and general
    business credits covering carryovers to or from the taxable year of
    a discharge of an amount for purposes of determining the amount
    allowable as a credit under section 30 (relating to credit for
    increasing research activities), or section 38 (relating to general
    business credit), and directing that there shall not be taken into
    account any portion of a carryover which is attributable to the
    employee stock ownership credit determined under section 41 for
    former provisions covering carryovers to or from the taxable year
    of the discharge of an amount for purposes of determining the
    amount of a credit allowable under section 38 (relating to
    investment in certain depreciable property), section 40 (relating
    to expenses of work incentive programs), section 44B (relating to
    credit for employment of certain new employees), section 44E
    (relating to alcohol used as a fuel), or section 44F (relating to
    credit for increasing research activities), and directing that, for
    purposes of clause (i), there could not be taken into account any
    portion of a carryover which was attributable to the employee plan
    credit (within the meaning of section 48(o)(3)).
      Subsec. (d)(6). Pub. L. 98-369, Sec. 721(b)(2), struck out ''or S
    corporation shareholder level'' in heading and second sentence
    which provided that ''In the case of an S corporation, subsections
    (a), (b), and (c) shall apply at the shareholder level.''.  See
    par. (7)(A).
      Subsec. (d)(7) to (10). Pub. L. 98-369, Sec. 721(b)(2), added
    par. (7) and redesignated former pars. (7) to (9) as (8) to (10),
    respectively.
      Subsec. (e)(10). Pub. L. 98-369, Sec. 59(a), added par. (10).
      Subsec. (e)(10)(C). Pub. L. 98-369, Sec. 59(b)(1), which added
    subpar. (C), effective as if included in the amendments made by
    section 806(e) and (f) of Pub. L. 94-455, was repealed by Pub. L.
    99-514, Sec. 621(e), (f)(2), eff.  Jan. 1, 1986, with certain
    exceptions, see Effective Date of 1986 Amendment note below.
      Subsec. (f). Pub. L. 98-369, Sec. 1076(a), added subsec. (f).
      1983 - Subsec. (b)(2)(B)(v). Pub. L. 97-448, Sec. 102(h)(1),
    added cl. (v).
      Subsec. (e)(7)(A)(iii). Pub. L. 97-448, Sec. 304(d), added cl.
    (iii).
      1982 - Subsec. (d)(6). Pub. L. 97-354 inserted ''or S corporation
    shareholder level'' in heading and inserted ''In the case of an S
    corporation, subsections (a), (b), and (c) shall be applied at the
    shareholder level.''
      1980 - Pub. L. 96-589 completely revised and expanded provisions
    by specifying the types of indebtedness and by setting out
    priorities among the exclusions, to reflect the revision of Title
    11, Bankruptcy, in 1978.
      1976 - Pub. L. 94-455, Sec. 1951(b)(2)(A), struck out ''(a)
    Special rule of exclusion. - '' after ''Income from discharge of
    indebtedness'' and struck out subsec. (b) which related to
    discharge, cancellation, or modification of indebtedness of certain
    railroad corporations.
      Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out ''or his
    delegate'' after ''Secretary''.
      1960 - Subsec. (b). Pub. L. 86-496 provided that if the
    discharge, cancellation, or modification of any indebtedness is
    effected pursuant to a court order in a receivership proceeding or
    in a proceeding under section 77 of the Bankruptcy Act, commenced
    before Jan. 1, 1960, then no amount is to be included in gross
    income with respect to it, and struck out provisions which made
    subsection inapplicable to discharges occurring in a taxable year
    beginning after Dec. 31, 1957.
      1956 - Subsec. (b). Act June 29, 1956, substituted ''December 31,
    1957'' for ''December 31, 1955''.

                      EFFECTIVE DATE OF 2007 AMENDMENT
     2007 - P.L. 110-142
SECTION 1. <<NOTE: 26 USC 1 note.>> SHORT TITLE.
    (d) Effective Date.--The <<NOTE: 26 USC 108 note.>> amendments made 
by this section shall apply to discharges of indebtedness on or after 
January 1, 2007.
                      
                      EFFECTIVE DATE OF 2005 AMENDMENT
      P.L. 109-73
      Section 401(e) Effective Date.--This section shall apply to discharges made on 
      or after August 25, 2005, and before January 1, 2007.
                      EFFECTIVE DATE OF 2004 AMENDMENT
      Amendment by Pub.L.108-357,Sec.896(a), shall apply with respect
      to cancellations of indebtedness occurring on or after the date
      of the enactment of this Act.
                      EFFECTIVE DATE OF 1998 AMENDMENT
      Amendment by Pub. L. 105-206 effective, except as otherwise
    provided, as if included in the provisions of the Taxpayer Relief
    Act of 1997, Pub. L. 105-34, to which such amendment relates, see
    section 6024 of Pub. L. 105-206, set out as a note under section 1
    of this title.
                      EFFECTIVE DATE OF 1997 AMENDMENT
      Section 225(b) of Pub. L. 105-34 provided that: ''The amendments
    made by this section (amending this section) shall apply to
    discharges of indebtedness after the date of the enactment of this
    Act (Aug. 5, 1997).''
                      EFFECTIVE DATE OF 1996 AMENDMENT
      Amendment by Pub. L. 104-188 effective as if included in the
    provision of the Revenue Reconciliation Act of 1993, Pub. L.
    103-66, Sec. 13001-13444, to which such amendment relates, see
    section 1703(o) of Pub. L. 104-188, set out as a note under section
    39 of this title.
                      EFFECTIVE DATE OF 1993 AMENDMENT
      Section 13150(d) of Pub. L. 103-66 provided that: ''The
    amendments made by this section (amending this section and sections
    703 and 1017 of this title) shall apply to discharges after
    December 31, 1992, in taxable years ending after such date.''
      Section 13226(a)(3) of Pub. L. 103-66 provided that:
      ''(A) In general. - Except as otherwise provided in this
    paragraph, the amendments made by this subsection (amending this
    section and section 382 of this title) shall apply to stock
    transferred after December 31, 1994, in satisfaction of any
    indebtedness.
      ''(B) Exception for title 11 cases. - The amendments made by this
    subsection shall not apply to stock transferred in satisfaction of
    any indebtedness if such transfer is in a title 11 or similar case
    (as defined in section 368(a)(3)(A) of the Internal Revenue Code of
    1986) which was filed on or before December 31, 1993.''
      Section 13226(b)(4) of Pub. L. 103-66 provided that: ''The
    amendments made by this subsection (amending this section) shall
    apply to discharges of indebtedness in taxable years beginning
    after December 31, 1993.''
                      EFFECTIVE DATE OF 1990 AMENDMENT
      Section 11325(c) of Pub. L. 101-508 provided that:
      ''(1) In general. - Except as provided in paragraph (2), the
    amendments made by this section (amending this section and section
    1275 of this title) shall apply to debt instruments issued, and
    stock transferred, after October 9, 1990, in satisfaction of any
    indebtedness.
      ''(2) Exceptions. - The amendments made by this section shall not
    apply to any debt instrument issued, or stock transferred, in
    satisfaction of any indebtedness if such issuance or transfer (as
    the case may be) -
        ''(A) is in a title 11 or similar case (as defined in section
      368(a)(3)(A) of the Internal Revenue Code of 1986) which was
      filed on or before October 9, 1990,
        ''(B) is pursuant to a written binding contract in effect on
      October 9, 1990, and at all times thereafter before such issuance
      or transfer,
        ''(C) is pursuant to a transaction which was described in
      documents filed with the Securities and Exchange Commission on or
      before October 9, 1990, or
        ''(D) is pursuant to a transaction -
          ''(i) the material terms of which were described in a written
        public announcement on or before October 9, 1990,
          ''(ii) which was the subject of a prior filing with the
        Securities and Exchange Commission, and
          ''(iii) which is the subject of a subsequent filing with the
        Securities and Exchange Commission before January 1, 1991.''
      Amendment by section 11813(b)(6) of Pub. L. 101-508 applicable to
    property placed in service after Dec. 31, 1990, but not applicable
    to any transition property (as defined in section 49(e) of this
    title), any property with respect to which qualified progress
    expenditures were previously taken into account under section 46(d)
    of this title, and any property described in section 46(b)(2)(C) of
    this title, as such sections were in effect on Nov. 4, 1990, see
    section 11813(c) of Pub. L. 101-508, set out as a note under
    section 29 of this title.
                      EFFECTIVE DATE OF 1988 AMENDMENT
      Amendment by Pub. L. 100-647 effective, except as otherwise
    provided, as if included in the provision of the Tax Reform Act of
    1986, Pub. L. 99-514, to which such amendment relates, see section
    1019(a) of Pub. L. 100-647, set out as a note under section 1 of
    this title.
                      EFFECTIVE DATE OF 1986 AMENDMENT
      Amendment by section 104(b)(2) of Pub. L. 99-514 applicable to
    taxable years beginning after Dec. 31, 1986, see section 151(a) of
    Pub. L. 99-514, set out as a note under section 1 of this title.
      Amendment by section 231(d)(3)(D) of Pub. L. 99-514 applicable to
    taxable years beginning after Dec. 31, 1985, see section 231(g) of
    Pub. L. 99-514, set out as a note under section 41 of this title.
      Section 405(c) of Pub. L. 99-514 provided that: ''The amendments
    made by this section (amending this section and section 1017 of
    this title) shall apply to discharges of indebtedness occurring
    after April 9, 1986, in taxable years ending after such date.''
      Repeal by section 621(e)(1) of Pub. L. 99-514 of amendment by
    section 59(b)(1) of Pub. L. 99-369, which was effective as if
    included in the amendments made by section 806(e) and (f) of Pub.
    L. 94-455, effective Jan. 1, 1986, with certain exceptions, see
    section 621(f)(2) of Pub. L. 99-514, set out as a note under
    section 382 of this title.
      Amendment by section 805(c)(2), (4) of Pub. L. 99-514 applicable
    to taxable years beginning after Dec. 31, 1986, with certain
    changes required in method of accounting, see section 805(d) of
    Pub. L. 99-514, set out as a note under section 166 of this title.
      Section 822(c) of Pub. L. 99-514 provided that: ''The amendments
    made by this section (amending this section and section 1017 of
    this title) shall apply to discharges after December 31, 1986.''
      Amendment by section 1171(b)(4) of Pub. L. 99-514 applicable to
    compensation paid or accrued after Dec. 31, 1986, in taxable years
    ending after such date, except as otherwise provided, see section
    1171(c) of Pub. L. 99-514, set out as a note under section 38 of
    this title.
      Amendment by section 1847(b)(7) of Pub. L. 99-514 effective,
    except as otherwise provided, as if included in the provisions of
    the Tax Reform Act of 1984, Pub. L. 98-369, div.  A, to which such
    amendment relates, see section 1881 of Pub. L. 99-514, set out as a
    note under section 48 of this title.
                      EFFECTIVE DATE OF 1984 AMENDMENT
      Section 59(b)(2) of Pub. L. 98-369 provided that: ''The amendment
    made by paragraph (1) (amending this section) shall take effect as
    if it had been included in the amendments made by subsections (e)
    and (f) of section 806 of the Tax Reform Act of 1976 (Pub. L.
    94-455).'' See Effective Date of 1976 Amendment note set out under
    section 382 of this title.
      Section 59(b)((c)) of Pub. L. 98-369 provided that:
      ''(1) In general. - Except as otherwise provided in this
    subsection, the amendment made by subsection (a) (amending this
    section) shall apply to transfers after the date of the enactment
    of this Act (July 18, 1984) in taxable years ending after such
    date.
      ''(2) Transitional rule. - The amendment made by subsection (a)
    shall not apply to the transfer by a corporation of its stock in
    exchange for debt of the corporation after the date of the
    enactment of this Act if such transfer is -
        ''(A) pursuant to a written contract requiring such transfer
      which was binding on the corporation at all times on June 7,
      1984, and at all times after such date but only if the transfer
      takes place before January 1, 1985, and only if the transferee
      held the debt at all times on June 7, 1984, or
        ''(B) pursuant to the exercise of an option to exchange debt
      for stock but only if such option was in effect at all times on
      June 7, 1984, and at all times after such date and only if at all
      times on June 7, 1984, the option and the debt were held by the
      same person.
      ''(3) Certain transfers to controlling shareholder. - The
    amendment made by subsection (a) shall not apply to any transfer
    before January 1, 1985, by a corporation of its stock in exchange
    for debt of such corporation if -
        ''(A) such transfer is to another corporation which at all
      times on June 7, 1984, owned 75 percent or more of the total
      value of the stock of the corporation making such transfer, and
        ''(B) immediately after such transfer, the transferee
      corporation owns 80 percent or more of the total value of the
      stock of the transferor corporation.
      ''(4) Certain transfers pursuant to debt restructure agreement. -
    The amendment made by subsection (a) shall not apply to the
    transfer by a corporation of its stock in exchange for debt of the
    corporation after the date of the enactment of this Act and before
    January 1, 1985, if -
        ''(A) such transfer is covered by a debt restructure agreement
      entered into by the corporation during November 1983, and
        ''(B) such agreement was specified in a registration statement
      filed with the Securities and Exchange Commission by the
      corporation on March 7, 1984.''
      Amendment by section 474(r)(5) of Pub. L. 98-369 applicable to
    taxable years beginning after Dec. 31, 1983, and to carrybacks from
    such years, see section 475(a) of Pub. L. 98-369, set out as a note
    under section 21 of this title.
      Amendment by section 721(b) of Pub. L. 98-369 applicable to
    contributions to capital after Dec. 31, 1980, in taxable years
    ending after such date, see section 721(y)(2) of Pub. L. 98-369,
    set out as a note under section 1361 of this title.
      Section 1076(b) of Pub. L. 98-369 provided that: ''The amendments
    made by this section (amending this section) shall apply to
    discharges of indebtedness made on or after January 1, 1983.''
                      EFFECTIVE DATE OF 1983 AMENDMENT
      Amendment by title I of Pub. L. 97-448 effective, except as
    otherwise provided, as if it had been included in the provision of
    the Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
    amendment relates, see section 109 of Pub. L. 97-448, set out as a
    note under section 1 of this title.
                      EFFECTIVE DATE OF 1982 AMENDMENT
      Amendment by Pub. L. 97-354 applicable to taxable years beginning
    after Dec. 31, 1982, see section 6(a) of Pub. L. 97-354, set out as
    an Effective Date note under section 1361 of this title.
                      EFFECTIVE DATE OF 1980 AMENDMENT
      Section 7 of Pub. L. 96-589, as amended by Pub. L. 99-514, Sec.
    2, Oct. 22, 1986, 100 Stat. 2095, provided that:
      ''(a) For Section 2 (Relating to Tax Treatment of Discharge of
    Indebtedness). -
        ''(1) In general. - Except as provided in paragraph (2), the
      amendments made by section 2 (amending this section and sections
      111, 118, 382, 703 and 1017 of this title) shall apply to any
      transaction which occurs after December 31, 1980, other than a
      transaction which occurs in a proceeding in a bankruptcy case or
      similar judicial proceeding (or in a proceeding under the
      Bankruptcy Act) (Title 11, Bankruptcy) commencing on or before
      December 31, 1980.
        ''(2) Transitional rule. - In the case of any discharge of
      indebtedness to which subparagraph (A) or (B) of section
      108(a)(1) of the Internal Revenue Code of 1986 (formerly I.R.C.
      1954) (relating to exclusion from gross income), as amended by
      section 2, applies and which occurs before January 1, 1982, or
      which occurs in a proceeding in a bankruptcy case or similar
      judicial proceedings commencing before January 1, 1982, then -
          ''(A) section 108(b)(2) of the such Code (relating to
        reduction of tax attributes), as so amended, shall be applied
        without regard to subparagraphs (A), (B), (C), and (E) thereof,
        and
          ''(B) the basis of any property shall not be reduced under
        section 1017 of such Code (relating to reduction in basis in
        connection with discharges of indebtedness), as so amended,
        below the fair market value of such property on the date the
        debt is discharged.
      ''(b) For Section 3 (Relating to Rules Relating to Title 11 Cases
    for Individuals). - The amendments made by section 3 (enacting
    sections 1398 and 1399 of this title and amending sections 443,
    6012 and 6103 of this title) shall apply to any bankruptcy case
    commencing more than 90 days after the date of the enactment of
    this Act (Dec. 24, 1980).
      ''(c) For Section 4 (Relating to Corporate Reorganization
    Provisions). -
        ''(1) In general. - The amendments made by section 4 (enacting
      section 370 of this title and amending sections 354, 355, 357,
      368 and 381 of this title) shall apply to any bankruptcy case or
      similar judicial proceeding commencing after December 31, 1980.
        ''(2) Exchanges of property for accrued interest. - The
      amendments made by subsection (e) of section 4 (amending sections
      354 and 355 of this title) (relating to treatment of property
      attributable to accrued interest) shall also apply to any
      exchange -
          ''(A) which occurs after December 31, 1980, and
          ''(B) which does not occur in a bankruptcy case or similar
        judicial proceeding (or in a proceeding under the Bankruptcy
        Act) commenced on or before December 31, 1980.
      ''(d) For Section 5 (Relating to Miscellaneous Corporate
    Amendments). -
        ''(1) For subsection (a) (relating to exemption from personal
      holding company tax). - The amendments made by subsection (a) of
      section 5 (amending section 542 of this title) shall apply to any
      bankruptcy case or similar judicial proceeding commenced after
      December 31, 1980.
        ''(2) For subsection (b) (relating to repeal of special
      treatment for certain railroad redemptions). - The amendments
      made by subsection (b) of section 5 (amending section 302 of this
      title) shall apply to stock which is issued after December 31,
      1980 (other than stock issued pursuant to a plan of
      reorganization approved on or before that date).
        ''(3) For subsection (c) (relating to application of 12-month
      liquidation rule). - The amendment made by subsection (c) of
      section 5 (amending section 337 of this title) shall apply to any
      bankruptcy case or similar judicial proceeding commenced after
      December 31, 1980.
        ''(4) For subsection (d) (relating to permitting bankruptcy
      estate to be subchapter s shareholder). - The amendment made by
      subsection (d) of section 5 (amending section 1371 of this title)
      shall apply to any bankruptcy case commenced on or after October
      1, 1979.
        ''(5) For subsection (e) (relating to certain transfers to
      controlled corporations). - The amendments made by subsection (e)
      of section 5 (amending section 351 of this title) shall apply as
      provided in subsection (a) of this section.
        ''(6) For subsection (f) (relating to effect of debt discharge
      on earnings and profits). - The amendment made by subsection (f)
      of section 5 (amending section 312 of this title) shall apply as
      provided in subsection (a) of this section.
      ''(e) For Section 6 (Relating to Changes in Tax Procedures). -
    The amendments made by section 6 (enacting sections 6658 and 7464
    of this title, amending sections 128, 354, 422, 1023, 3302, 6012,
    6036, 6155, 6161, 6212, 6213, 6216, 6326 (now 6327), 6404, 6503,
    6512, 6532, 6871, 6872, 6873, 7430, and 7508 of this title,
    repealing section 1018 of this title, and redesignating former
    section 7464 of this title as 7465) shall take effect on October 1,
    1979, but shall not apply to any proceeding under the Bankruptcy
    Act (Title 11) commenced before October 1, 1979.
      ''(f) Election To Substitute September 30, 1979, for December 31,
    1980. -
        ''(1) In general. - The debtor (or debtors) in a bankruptcy
      case or similar judicial proceeding may (with the approval of the
      court) elect to apply subsections (a), (c), and (d) by
      substituting 'September 30, 1979' for 'December 31, 1980' each
      place it appears in such subsections.
        ''(2) Effect of election. - Any election made under paragraph
      (1) with respect to any proceeding shall apply to all parties to
      the proceeding.
        ''(3) Revocation only with consent. - Any election under this
      subsection may be revoked only with the consent of the Secretary
      of the Treasury or his delegate.
        ''(4) Time and manner of election. - Any election under this
      subsection shall be made at such time, and in such manner, as the
      Secretary of the Treasury or his delegate may by regulations
      prescribe.
      ''(g) Definitions. - For purposes of this section -
        ''(1) Bankruptcy case. - The term 'bankruptcy case' means any
      case under title 11 of the United States Code (as recodified by
      Public Law 95-598).
        ''(2) Similar judicial proceeding. - The term 'similar judicial
      proceeding' means a receivership, foreclosure, or similar
      proceeding in a Federal or State court (as modified by section
      368(a)(3)(D) of the Internal Revenue Code of 1986).''
                      EFFECTIVE DATE OF 1976 AMENDMENT
      Amendment by section 1951(b)(2)(A) of Pub. L. 94-455 applicable
    with respect to taxable years beginning after Dec. 31, 1976, see
    section 1951(d) of Pub. L. 94-455, set out as a note under section
    72 of this title.
                      EFFECTIVE DATE OF 1960 AMENDMENT
      Section 1(b) of Pub. L. 86-496 provided that: ''The amendment
    made by subsection (a) (amending this section) shall apply to
    taxable years ending after December 31, 1959, but only with respect
    to discharges occurring after such date.''
                             SAVINGS PROVISION
      For provisions that nothing in amendment by section 11813 of Pub.
    L. 101-508 be construed to affect treatment of certain transactions
    occurring, property acquired, or items of income, loss, deduction,
    or credit taken into account prior to Nov. 5, 1990, for purposes of
    determining liability for tax for periods ending after Nov. 5,
    1990, see section 11821(b) of Pub. L. 101-508, set out as a note
    under section 29 of this title.
      Section 1951(b)(2)(B) of Pub. L. 94-455 provided that: ''If any
    discharge, cancellation, or modification of indebtedness of a
    railroad corporation occurs in a taxable year beginning after
    December 31, 1976, pursuant to an order of a court in a proceeding
    referred to in section 108(b)(A) or (B) which commenced before
    January 1, 1960, then, notwithstanding the amendments made by
    subparagraph (A) (amending this section) the provisions of
    subsection (b) of section 108 shall be considered as not repealed
    with respect to such discharge, cancellation, or modification of
    indebtedness.''
             EXCLUSION OF CERTAIN CANCELLATIONS OF INDEBTEDNESS
      Pub. L. 107-134, title I, Sec. 105, Jan. 23, 2002, 115 Stat.
    2432, provided that:
      ''(a) In General. - For purposes of the Internal Revenue Code of
    1986 -
        ''(1) gross income shall not include any amount which (but for
      this section) would be includible in gross income by reason of
      the discharge (in whole or in part) of indebtedness of any
      taxpayer if the discharge is by reason of the death of an
      individual incurred as the result of the terrorist attacks
      against the United States on September 11, 2001, or as the result
      of illness incurred as a result of an attack involving anthrax
      occurring on or after September 11, 2001, and before January 1,
      2002; and
        ''(2) return requirements under section 6050P of such Code
      shall not apply to any discharge described in paragraph (1).
      ''(b) Effective Date. - This section shall apply to discharges
    made on or after September 11, 2001, and before January 1, 2002.''
             PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
      For provisions directing that if any amendments made by subtitle
    A or subtitle C of title XI (Sec. 1101-1147 and 1171-1177) or title
    XVIII (Sec. 1800-1899A) of Pub. L. 99-514 require an amendment to
    any plan, such plan amendment shall not be required to be made
    before the first plan year beginning on or after Jan. 1, 1989, see
    section 1140 of Pub. L. 99-514, as amended, set out as a note under
    section 401 of this title.
 

References

                   SECTION REFERRED TO IN OTHER SECTIONS
      This section is referred to in sections 118, 147, 382, 703, 773,
    774, 1017, 1503 of this title.
 

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