Tax Liability

[mjones2948]

What is the name of your state (only U.S. law)? Texas. If a bank is willing to forgive 50% of a loan to an LLP, is the portion forgiven subject to tax (capital gains)? If so, is there a way to circumvent?

 

[tranquility]

It is ordinary income. The main way to "circumvent" is to be insolvent.

 

[mjones2948]

tax liability

What if the bank is willing to sell the note to the LLP at a discounted rate? Is the difference still considered ordinary income?

 

[tranquility]

Forgiveness of debt income is ordinary income, not capital gains.