Article:
Patricia L. Bryan, Cancellation of Indebtedness By Issuing Stock in Exchange: Challenging the Congressional Solution to Debt-Equity Swaps, 63 Texas L. Rev. 89 (1984).
 

Abstract:
Section 108(e)(10) of the 1984 Tax Reform Act targeted (and attempted to eliminate) the transaction known as a “debt-equity swap”, in which corporations retire discounted debt in exchange for stock, without recognizing the gain that would have been taxed had the debt been retired with cash. Bryan argues that this section of the Tax Reform Act has practical and theoretical flaws. Specifically, the mechanism the Act provides for measuring a corporation’s income exclusion is inconsistent with other tax laws. Moreover, the Act ignores key policy provisions underlying the Bankruptcy Act of 1980. Bryan then analyzes in some detail what the tax consequences should be for a corporation that exchanges debt for stock.