Badyal Authors Law360 Article on Tax Considerations for Distressed Borrowers

Glaser Weil tax partner Aman Badyal authored an article for Law360 Tax Authority titled “Avoiding Negative Tax Consequences In Loan Modifications.” High interest rates, the ever-present remote work life, and e-commerce growth all have contributed to a dramatic uptick in nonperforming commercial real estate loans as many of today’s high-profile urban office buildings go into default.

Badyal expects business activity to continue to struggle in city centers, and he identified three areas where borrowers could experience negative income tax results and offered strategies to avoid them:

1. Loan Workouts
2. Foreclosure or Deed-in-Lieu Transactions
3. Partnership Transactions

Badyal advises real estate developers and investors in connection with strategies to minimize income tax associated with repositioning or recapitalizing financially distressed real estate projects, including strategies to avoid the cancellation of indebtedness income; such strategies often involve preferred equity recapitalizations, underwater 1031 exchanges, loan workouts, or sales of partnership interests.

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