October 25, 2022
Tax Director Vivian Peng published an article with Ecovis Global, discussing an exception to the mirror image rule in the tax treatment of a debt instrument transaction.
Ecovis Global
By Vivian Peng, Director, Tax & Business Services
Excerpt:
The issuer of the stock might be expected to reflect the mirror image of the holder’s position and to recognize loss on the extinguished debt. But in actuality, an exchange of new stock for existing debt by the issuer qualifies as a “recapitalization” for tax purposes, and the issuer recognizes no gain or loss.
