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Loan Guarantees; Debt in Capital Structure; Ordinary Income on Sale of Business


Drawn from Steve Gorin’s 3rd quarter 2022 newsletter, this course discusses loan guarantees, recent developments in debt as part of a business’ capital structure, state estate tax, and ordinary income on sale of a pass-through business. 

Proposed regulations regarding a loan guarantee generating a debt of the estate motivated Steve to research cases in depth on the estate and gift tax consequences.  We will start with legal basics of loan guarantees, discuss their estate and gift tax consequences, and review any income tax deduction allowable when the guarantor has to pay but can’t recover from the debtor. 

Our discussion of debt as part of a business’ capital structure will begin with a recent case where debt that included bonus interest on the sale of the secured asset would be recharacterized as equity to some extent.  Next is an overview of limitations on deducting business interest.  Then we return to whether an arrangement is a business or something else, whether that arrangement is by form a loan, a partnership, or trust. 

We will conclude discussing ordinary income generated when a pass-through entity is sold.  First, we will compare the sale of a pass-through entity to the sale of Code § 1202 small business stock.  Next, we will discuss how depreciation recapture and a cash method taxpayer’s accounts receivable can generate ordinary income.  We will conclude discussing how to work around the ordinary income issue and whether doing so is worthwhile.

The live presentation of this webinar was approved for 1.5 hours of general CLE credit in California, Illinois, and Texas; 1.8 hours of general CLE credit in Missouri; and 1.5 hours of professional practice CLE credit in New York. Please visit the CLE Overview page to see how the CLE credit for this recorded webinar can be applied in CA, IL, MO, NY, & TX. 

If you are interested in receiving CA, IL, MO, NY, or TX CLE credit for watching the recorded presentation, you must register for the program by clicking here. If you are not interested in receiving CLE credit, you can watch the presentation by clicking the play button on the video.

Participants will only be emailed a Certificate of Attendance if the webinar is viewed in its entirety. If you were unable to view the webinar in its entirety, please contact webinarinquiries@thompsoncoburn.com to see if you are eligible to receive partial credit. 

If you do not receive your Certificate of Completion, please e-mail webinarinquiries@thompsoncoburn.com

Steve Gorin
Mariquita Barbieri, LLM

For technical materials supporting the slides, please see Steve's newsletter

Originally Presented:
October 25, 2022