Steve;
Interestingly enough, there were two 1099-C's sent to the shareholder (husband and wife). One was for a line to the Corp, guaranteed by them, and one to them, deposited in the corporation and had been paid by the corporation.
The one to the corporation is taxable, however, I keeping going back and forth on the second.
The individuals are insolvent.
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Robert Brown
ROBERT N. BROWN, CPA
Jericho NY
Original Message:
Sent: 09-05-2016 08:57
From: Stephen Mankowski
Subject: S Corporation and forgiveness of debt
I believe that the Shareholder has a taxable event, but not the corporation. Officially, the corporation owes the money to the shareholder NOT the bank. Therefore, the forgiveness of debt would result in a 1099C going to the shareholder as taxable income.
Now for the questions:
- does the shareholder owe 100% of the s-corp?
- has the shareholder forgiven the debt to the company?
- if forgiven, would this income be passed through to the shareholders, thus creating double income to the taxpayer?
- if NOT forgiven, the S-Corp would have to continue paying the shareholder
Steve
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Stephen Mankowski
EP CAINE & ASSOCIATES, CPA LLC
Bryn Mawr PA
215-674-5652
Original Message:
Sent: 09-04-2016 13:57
From: Robert Brown
Subject: S Corporation and forgiveness of debt
An S corporation shareholder takes out a loan and lends it to the S corporation. The corporation is paying the debt and several years later, the bank forgives the debt.
What is the impact to the corporation?
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Robert Brown
ROBERT N. BROWN, CPA
Jericho NY
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