What are the tax consequences to me (or the recipient) of forgiving a loan to a family member 5 years after the loan was made?
The person whose debt is forgiven has taxable income in the amount of the debt unless the forgiveness was a gift. If the forgiveness is a gift, there is not income tax liability.
The person who forgives the debt gets no deduction if the debt was not a business debt, or if the forgiveness is a gift rather than a business write off. There is no gift tax because the debt was only $12,000 (increased in 2006) and there is an annual exclusion from the gift tax of that amount.
Since your situation has to do with a family member, the forgiveness is probably a gift and there are no tax consequences to anyone.
State Law Center
|
Legal Resource Directory
|
Legal Articles
|
Insurance Advice and Quotes
|
FreeAdvice Answers
|
Community Forums
