Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
130.0225 Repossession Loss. A sold equipment to B, taking a down payment for one-third of the price and a promissory note for the balance secured by the equipment. B subsequently declared bankruptcy and the automatic stay prevented A from proceeding under the security agreement. A and B entered into a stipulation in the bankruptcy which provided that the stay would be lifted if the terms were violated. The terms were violated and A sold the equipment to C, applying the proceeds to the debt of B.
The sale of the equipment to C was not pursuant to the order of the bankruptcy court, nor was it made on behalf of the original buyer, B. The violation of the stipulation lifted the stay and allowed A to exercise its rights under the promissory note. The sale was made on A's own behalf.
Any bad debt loss to which A might be entitled on the sale to B is limited to the amount charged off for income tax purposes, and further limited by the repossession loss calculation pursuant to Regulation 1642(f). 4/6/90.