Tax basis: Purchase price, including commissions and other expenses, used to determine capital gains and capital losses for tax purposes. This can be determined by several methods. For a purchased investment, the tax basis is the amount paid. If inherited, the tax basis is the value of the stock on the date of the original owner's death. If received as a gift, the tax basis is the amount that was originally paid for the investment, unless the market value of the investment on the date the gift was given was lower. also called cost basis or basis.
http://www.investorwords.com/4886/tax_basis.html

Debt restructuring: A method used by companies with outstanding debt obligations to alter the terms of the debt agreements in order to achieve some advantage.
http://www.investopedia.com/terms/d/debtrestructuring.asp


Any debt involves two parties, the creditor with the creditor's rights to get the debt repayment and the debtor with the debt obligations to repay the debt.

For example, Company A (the debtor) owed Company B (the creditor) $10000. However, due to financial difficulties, Company A was unable to repay the debt in full. Thus, Company A and Company B decided to settle the debt through debt restructuring under which Company A repaid $9000 to Company B as a full settlement of the debt.

To Company A (the debtor), this $1000 should be recognized (确认; that is the term used in accounting) as a "taxable gain or income" according to China's existing accounting practices. Conversely, to Company B (the creditor), this $1000 should be recognized as a "taxable loss" so that this taxable loss should be deducted from its gross income before taxation.


You may also refer to these Powerpoint presentations for China's taxation practices concerning debt restructuring.

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Note added at 22 hrs (2010-02-13 10:17:58 GMT)
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