Stimulus Legislation Provides Tax Relief For Certain Debt Restructurings

One of the most significant tax provisions contained in the recently enacted American Recovery and Reinvestment Act of 2009 might prove helpful to certain taxpayers looking to restructure their balance sheets.

A debtor generally recognizes income from the cancellation of its debt. A debtor recognizes COD income when it purchases the debt instrument for less than the adjusted issue price of the debt or exchanges an old obligation for a new obligation with a reduced adjusted issue price from the old obligation. For this purpose the same result occurs upon a modification of debt that is treated as an exchange. A debtor also recognizes COD income when a person who bears a relationship to the debtor described in Code section 267(b) or Code section 707(b) acquires the debtor's debt for less than the adjusted issue price of the debt.

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Year-End Gifts

          With only two full weeks remaining until the New Year, time is of the essence to execute crucial tax-saving donations. "The year end is a good time to review your charitable giving to ensure that it is being done in the most tax-efficient manner,"offers Attorney Carl R. Williams of Tom Bolt and Associates, P.C.  Charitable giving is a form of estate planning, because a gift to charity will never be subject to estate or gift tax. If you are planning to make a large gift before January 1, 2008, it is important to review the impact on your 2007 income tax liability and whether it may make sense to defer all or a portion of the gift until 2008. If the gift is of real property and will require an appraisal, it is critical to start the process as soon as possible so that the appraisal is available before year end.

          "In addition to charitable giving, my clients also express an interest in making inter-family donations," says Attorney Williams. Every person may give up to $12,000 free of gift tax to as many individuals as they wish. Because annual exclusions do not carry over into subsequent years, you will lose your annual exclusions for 2007 gifts if you do not make them before Dec. 31, 2007. An annual exclusion gift may consist of almost any asset, including stocks, bonds, real estate, cash, and partnership interests. Subject to special rules, annual exclusion gifts may also be made in trust.

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Living Wills In The News


The importance of a Living Will made headlines again on Monday evening during remarks from Republican presidential candidate Fred Thompson. Last month, Thompson sidestepped a question about the Terri Schiavo right-to-die case. However, on Monday Thompson said he did so because he had to face a similar situation in his personal life with the death of his own daughter. Thompson's remarks indicated that his daughter had been on life support and ultimately died on Jan. 30, 2002, six days after being brought unconscious to a hospital emergency room.

Thompson went on to say, "These things need to be decided by the family, and I was at that bedside, and I had to make those decisions with the rest of my family. I will assure you one thing, no matter which decision you make, you will never know whether or not you made exactly the right decision, Thompson said. " He added, "should be decided by families. The federal government and the state government, too — except for the court system — ought to stay out of it, as far as I'm concerned."

While Thompson’s remarks did not indicate whether his daughter Elizabeth Thompson Panici had a Living Will, it is reasonable to assume that the excruciating decisions the Thompson’s had to make as a family could have been avoided if Ms. Thompson, then age 38, had prepared a Living Will addressing the possibility of her permanent incapacity and shared her feelings with her family.

A Living Will, also referred to as an Advanced Health Care Directive, is a legal document that expresses specific instructions as to the course of medical treatment that is to be taken by caregivers, or, in some cases the refusal of certain types of medical treatment. Once executed, the Living Will does not have any force or effect until the individual is unable, due to their incapacity, to personally provide a caregiver informed consent to proceed with certain medical treatments.

An executed Living Will may declare that when a client is certified to be permanently unconscious, as is usually determined by the client's attending physician and a second examining physician, that artificial life-support systems be disconnected or withheld altogether. The client may also elect to discontinue or prevent artificial nutrition and hydration through feeding tubes or intravenous methods.

I am the first to acknowledge that on the best of days, it is hard to conceive the issues concerning our own mortality, and understandably more difficult to talk about them. But I suggest that if you are able to set aside time to explore your own feelings about the end of your life or the potential for unexpected injury that could result in a terminal condition, and then express those wishes in a meaningful and legal document, the comfort and peace of mind you will bring -- not only to yourself, but also to those closest to you -- will greatly offset its difficulty.



International Lawyers Learn of Virgin Islands EDC Program

Tom Bolt, Managing Attorney of Tom Bolt & Associates, PC, addressed the Annual Meeting of the Network of Leading Law Firms at their Annual Meeting in New York this past week.  Bolt explained the Virgin Islands Economic Development Program that allows taxpayers to pay only 10% of their federal income tax liability and no other state or federal taxes.

"The IRS's recent tax opinion, IRS Tax Opinion 76-2006, is a green light for the software industry," Bolt told the international group of attorneys.  "The IRS has said if you are a software developer and establish your operations in the United States Virgin Islands, you can exempt your sale of software anywhere in the world.  In addition, if you place your servers in the Territory and customers download your software or utlize your programs throughout the world, that income is exempt too." Bolt said.  "It is a great undiscovered program just waiting to be tapped."

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IRS Delivers Christmas Early to Virgin Islands

The United States Internal Revenue Service delivered an early Christmas present to the United States Virgin Islands, its Economic Development Program and particularly to software developers and companies.  IRS Notice 76-2006 issued in late August specifically cited the USVI tax abatement program for utlization by software companies.  The lucrative benefits of the program include a 90% abatement of federal income taxes and a 100% abatement of all other taxes.