College of Law Professor Gregory Germain Discusses Tax Implications in the LeClairRyan Bankruptcy Proceedings

Professor Gregory Germain
Gregory Germain Portrait

In the in-depth story, “Last Of LeClairRyan’s Partners Battle Opaque Tax Threat,” Professor Gregory Germain notes that the waiver of a bankruptcy claim based on an unpaid loan should be a concern because debt forgiveness is typically viewed as income for tax purposes. 

Germain says former shareholders may be able to avoid the bill if they can establish with the IRS they didn’t receive a benefit from the loan being forgiven.

“If a bankruptcy judge says, ‘You have these 10 partners who might own taxes,’ and the IRS feels there are 20 partners who owe taxes, they’ll go after the 20 partners,” Germain said.