How Guarantors Can Escape Tax On Soured Debt

Tax lawyer Bill Purdy and I shared a client with a small interest in a failed corporation with a huge SBA loan.  Could our client escape the tax consequences should we be able to settle his  liability on a million dollars in unpaid loan.  Was the client looking at a million dollars of cancellation of debt income? Here’s the marvelous result that Bill’s caper through the IRS regs returned.  Cathy Ever guarantee the debt of another? Ever meet anyone who has? Chances are if you’re in business and the business is a C-corporation, an S-corporation, an LLC , or a partnership, when that business borrows money, the lender will require one or more persons who own/control the entity to personally guarantee the business debt. It seems harmless at the time. But signing a personal guarantee is as serious as a hard attack. It can feel just like one if the lender tags you to actually pay the debt. Institutional lenders including but certainly not limited…

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