A grantor trust or disregarded entity becomes insolvent or bankrupt – but its owner is not. What is the owner’s tax liability?
Posted by: teamGreen In: Estate Planning|Trusts
Disregarded Entities (LLC’s, Sub-S Corps, Grantor Trusts) and Discharged Indebtedness INTERESTING QUESTION Suppose a grantor trust or disregarded entity[i] becomes insolvent or bankrupt – but its owner is not. Is the owner exempt from income tax if the trust or entity is discharged from indebtedness? Some taxpayers take the position that the exception described below [...]
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