The Deprizio doctrine is a bankruptcy rule that allows for the cancellation of a payment made to an outside creditor if it occurred more than 90 days before filing for bankruptcy and it benefits an inside creditor. This type of payment is referred to as a preferential transfer.
The Deprizio Doctrine is a principle in bankruptcy law that declares any payment made by a debtor to an external creditor within 90 days before filing for bankruptcy, which benefits an internal creditor, can be considered a preferential transfer and may be invalidated. To illustrate, suppose a construction company owes money to both an external supplier and an internal creditor, such as a family member who invested in the company. If the company pays off the external supplier before filing for bankruptcy but not the internal creditor, the payment to the external supplier can be invalidated as a preferential transfer since it benefits the internal creditor. The Deprizio Doctrine aims to prevent debtors from showing favoritism to specific creditors before filing for bankruptcy. It guarantees that all creditors are treated equitably and impartially throughout the bankruptcy process.
The Deprizio Doctrine is a legal principle that allows a corporation to deduct the amount of a loss resulting from the sale or exchange of its subsidiary’s stock.
Under the Deprizio Doctrine, a corporation can deduct the loss from the sale or exchange of its subsidiary’s stock if it can establish that the transaction was made for a valid business purpose and not solely for tax avoidance.
The Deprizio Doctrine was established to prevent corporations from artificially inflating their tax deductions by selling or exchanging their subsidiary’s stock at a loss.
No, not every corporation can claim a deduction under the Deprizio Doctrine. The corporation must meet certain requirements, such as demonstrating a valid business purpose for the transaction.
Yes, there are limitations to the deduction allowed under the Deprizio Doctrine. The deduction is limited to the actual economic loss suffered by the corporation, and it cannot exceed the adjusted basis of the subsidiary’s stock.
No, the Deprizio Doctrine cannot be used solely for tax avoidance purposes. The transaction must have a valid business purpose, and the deduction claimed must be based on the actual economic loss suffered by the corporation.
Yes, there have been several court cases that have addressed the Deprizio Doctrine. These cases have helped establish the requirements and limitations of the doctrine.
The application of the Deprizio Doctrine depends on the specific circumstances of each case. In some cases, the doctrine may be applied retroactively, while in others, it may only apply prospectively.
The Deprizio Doctrine is primarily applicable to corporations. Individuals generally cannot claim a deduction under this doctrine.
Yes, there are alternative methods for deducting losses from the sale or exchange of subsidiary stock, such as the “worthless stock deduction” or the “liquidation deduction.” These methods have their own requirements and limitations.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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