Tax Implications When Lenders Cancel Debts in the COVID-19 Era

▤ Summary

The Internal Revenue Code extracts a price for exempting COD income from taxation under the bankruptcy and insolvency exceptions. For the year when COD income occurs, the lender is supposed to report the forgiven amount to the borrower and to the IRS on Form 1099-C, Cancellation of Debt. Seller-financed debt arises when a buyer finances all or part of a property purchase with a private loan from the previous owner. • None Borrowers now have up to five years to repay PPP loans that arent forgiven, versus only 24 months under the original CARES Act. EHTC is a dedicated, full-service CPA firm in West Michigan that focuses on helping clients to achieve their full potential through comprehensive accounting, finance and tax services.

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