Ezel / IRS Rulings / 200936034

New Markets Credit recapture and loan-forgiveness questions

Number
200936034
Outcome
Advice
Document type
Chief Counsel Advice
IRS subject
New Markets Credit
Topics
Income and deductions
Code sections
§ 45D
Ruling dated
May 11, 2009
Publicly released
September 4, 2009
Source
View Official PDF

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2009, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Currency note: this determination was released in 2009
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

This Chief Counsel Advice addressed recapture and exit-strategy questions involving the New Markets Credit. It said a separate CCA would address the recapture issue. On the loan-forgiveness question, the email reasoned that when one person lends to another and forgives the loan, there is no capital gain on that transaction, and that the result should not change merely because credits are involved. It also noted that a nonprofit would not owe tax on the loan forgiveness under the scenario described.

Ruling snapshot

  • Question: How should recapture and a loan-forgiveness exit strategy be analyzed in the New Markets Credit scenario?
  • Outcome: Advice given.
  • Key authorities: IRC § 45D.

Full text (IRS public release)

ID: CCA-511105-09 Number: 200936034
Release Date: 9/4/2009
Office: ----------------
UILC: 45D.00-00

From: ------------------------
Sent: Monday 5/11/2009 10:53 AM
To: ----------------------
Cc: ----------------------------
Subject: Email Questions

---------

I spoke with -------regarding your issues- here is what we can do:

  1. Recapture Issue: I will send you an email CCA- when do you need it by?
  2. As for the exit strategy, we are still at odds with you on this issue. If person A takes a loan out from
    person B, and then B forgives the loan, there is no cap gains on that transaction. Now, under normal circumstances, A would have to pay taxes on the forgiveness of the loan, but in your scenario, we have a non-profit who doesn't pay taxes at all, so they wouldn't have that issue. Why would the result change because credits are involved? Just a thought.

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