I was given a loan of 250K to start my own business three years ago. To make a long story short if I stayed in business for 5 years the loan was forgiven. The organization that loaned me the money is reporting 125k this year and 125k next year. What are my estimated taxes and what may be some options on tax breaks with the loan money, etc.
The loan forgiveness is taxable. The exact rate will depend on your business income and tax bracket. You should consult a skilled accountant for the amount.
The loan is not taxable if you were insolvent at the time of the forgiveness, meaning that you owed more than you had in assets or if you declared bankruptcy.
It is also possible to claim up to $12,000 of the forgiveness as a gift, but it sounds like this loan was not a gift.
Hope this helps.
Karen
http://www.fishfindersdirect.com
The loan forgiveness is taxable. The exact rate will depend on your business income and tax bracket. You should consult a skilled accountant for the amount. The loan is not taxable if you were insolvent at the time of the forgiveness, meaning that you owed more than you had in assets or if you declared bankruptcy. It is also possible to claim up to $12,000 of the forgiveness as a gift, but it sounds like this loan was not a gift. Hope this helps. Karenhttp://www.fishfindersdirect.com
forgiven debt counts as income essentially right? In that case wouldn't the tax implictations be similar to earning an extra 125K this year and next?
kbjanos1672 | Window Shopper | 12/1/2009 - 4:41 pm
jamestkirk | Creator | 12/1/2009 - 8:33 pm
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