RR-2016-15: Income from Discharge of Indebtedness

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June 10, 2016

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Issue Number: RR-2016-15

Inside This Issue

Revenue Ruling 2016-15 clarifies when a real estate developer may exclude cancellation of debt (COD) income under the qualified real property business indebtedness (QRPBI) exclusion in §108(a)(1)(D). Specifically, this revenue ruling provides examples to clarify that QRPBI includes indebtedness relating only to depreciable property used in a taxpayer’s trade or business, and not property held for sale to customers. The examples provide that indebtedness incurred or assumed in connection with property held by a real estate developer as rental property will qualify as QRPBI because the property is depreciable. On the other hand, because property held for sale to customers is not depreciable, indebtedness incurred or assumed in connection with this type of property is not QRPBI, and thus is not excludable under §108.

Revenue Ruling 2016-15 will be in IRB 2016-26, dated June 27, 2016.

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