The treatment of loans to a debtor's former employees can result in unforeseen and unfavorable tax consequences. An unwary trustee or administrator of a plan of reorganization (each a 'Responsible
Debtor Strategies for Avoiding Unfavorable Tax
The treatment of loans to a debtor's former employees can result in unforeseen and unfavorable tax consequences. An unwary trustee or administrator of a plan of reorganization (each a 'Responsible Individual') who employs the wrong approach can expose the estate to unanticipated payroll tax liability. Moreover, if the Responsible Individual fails to reserve sufficient funds for payment of such payroll tax liability, he may be forced to pay such liability out of his own pocket. As a result, it is critical that a Responsible Individual be familiar with the issues, and employ the strategies discussed herein.
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