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Taxation of Debt Cancellation and Modification |
October 28, 2009
Previously published on October 2009
In the current economic environment, many borrowers struggle to make timely payments while other borrowers struggle to make any payments. Faced with the choice of receiving less than what is owed or none of what is owed, some lenders are renegotiating outstanding loans and granting lower interest rates, deferred payments, reduced principal, or other concessions. Transactions that used to occur infrequently, such as debt restructuring, debt forgiveness, and default, now take place more often. However, as illustrated by the examples below, these transactions often have tax implications that are not commonly known or considered.
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The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance. |
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