forgiving a loan

[coyne34]

Arizona
What are the tax consequences to me (or the recipient) of forgiving a loan to a family member five years after the loan ($10,000) was made?

 

[loku]

Forgiveness of debt

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 $10,000 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.