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1099 and personal guarantee - exception under CFR Title
The easiest way to explain what I mean is by an example.
Suppose Debtor owes Lender $100k guaranteed by Owner.
*Option 1, Owner pays*
Assume that when Debtor defaults, Lender pursues Owner and Owner pays the
$100k.
After making the payment, Owner has a right to reimbursement from Debtor.
If Debtor is unable to pay, Owner can forgive this debt resulting in a
$100k loss which Owner can deduct from his taxes.
*Option 2, Owner does not pay*
Under this scenario, assume Lender pursues Owner and Owner cannot pay.
Lender absolves Owner's obligation to pay.
IRS coming knocking and Debtor says, "If I had paid, I would have a 100k
deduction, therefore, under (e)(2) to the extent of my deduction (100k), I
do not have COD income."
I believe this analysis is correct but may be a bit oversimplified. The
form of entity may make a difference too, like what if this was a
corporation which did not make an S election? I think the result is the
same but you need to jump through more hoops to make the 100k deduction
obvious.
I could also be very wrong but this is my current understanding of the law.
Sincerely,
*Michael Avanesian, Esq. *
Avanesian Law Firm
101 N. Brand Blvd. PH 1920
Glendale, CA 91203
Tel: 818.276.2477 | Fax: 818.208.4550
*Confidentiality**: *This electronic transmission and its contents are
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On Tue, Nov 3, 2015 at 11:00 AM, cdcbaa cdcbaamailbox@gmail.com [cdcbaa] wrote:
>
>
> Mike:
>
> To what lost deduction are you referring? How would a guarantor get a
> deduction for a debtor making a payment?
>
> d
>
> Dennis McGoldrick, 350 S. Crenshaw Bl., #A207B, Torrance, Ca 90503
> 310-328-1001-voice
> [image: cid:part1.03050307.05030101@bklaw.com]
>
> On Nov 2, 2015, at 11:16 PM, Michael Avanesian michael@avanesianlaw.com
> [cdcbaa] wrote:
>
>
>
> I am not a tax expert by any means. I had not seen that section before but
> it deals with whether certain discharge of indebtedness had to be reported,
> not whether the money is actually owed.
>
> I would rely on IRC 108(e)(2) which says, "(2) *Income not realized to
> extent of lost deductions* No income shall be realized from the discharge
> of indebtedness to the extent that payment of the liability would have
> given rise to a deduction."
>
> Sincerely,
>
> *Michael Avanesian, Esq. *
> Avanesian Law Firm
> 101 N. Brand Blvd. PH 1920
> Glendale, CA 91203
> Tel: 818.276.2477 | Fax: 818.208.4550
>
> *Confidentiality**: *This electronic transmission and its contents are
> legally privileged and confidential information and intended solely for the
> use of the addressee. If the reader of this message is not the intended
> recipient, you are hereby notified that any dissemination, distribution,
> copying or other use of this message and its contents is strictly
> prohibited. If you have received this transmission in error, please reply
> to us immediately and delete this message from your directory.
>
> *IRS Circular 230 Disclosure:* To ensure compliance with requirements
> imposed by the IRS, please be advised that any U.S. federal tax advice
> contained in this communication (including any attachments) is not intended
> or written to be used or relied upon, and cannot be used or relied upon,
> for the purpose of (i) avoiding penalties under the Internal Revenue Code,
> or (ii) promoting, marketing or recommending to another party any
> transaction or matter addressed herein.
>
>
> On Mon, Nov 2, 2015 at 3:09 PM, Holly Roark hollyroark22@gmail.com
> [cdcbaa] wrote:
>
>>
>>
>> Tax people, does this really mean what it seems to say? If a guarantor
>> settles a debt or the lender charges it off, the guarantor does not incur
>> cancellation of debt income?
>>
>> (7) Guarantors and sureties. Solely for purposes of the reporting
>> requirements of this section,
>> a guarantor is not a debtor. Thus, in the case of guaranteed
>> indebtedness, reporting under this
>> section is not required with respect to a guarantor, whether or not there
>> has been a default and
>> demand for payment made upon the guarantor.
>>
>>
>> Holly Roark
>> Certified Bankruptcy Specialist*
>> *and Sports Lawyer*
>> holly@roarklawoffices.com **primary email address**
>> www.roarklawoffices.com
>> *Central District of California & District of Idaho* - Consumer
>> Bankruptcy Attorney
>> 1875 Century Park East, Suite 600 Los Angeles, CA 90067
>> T (310) 553-2600; F (310) 553-2601
>>
>> *By State Bar of California Board of Legal Specialization
>>
>>
>>
>
>
The easiest way to explain what I mean is by an example.Suppose Debtor owes Lender $100k guaranteed by Owner.Option 1, Owner paysAssume that when Debtor defaults, Lender pursues Owner and Owner pays the $100k.After making the payment, Owner has a right to reimbursement from Debtor. If Debtor is unable to pay, Owner can forgive this debt resulting in a $100k loss which Owner can deduct from his taxes.Option 2, Owner does not payUnder this scenario, assume Lender pursues Owner and Owner cannot pay. Lender absolves Owner's obligation to pay.If I had paid, I would have a 100k deduction, therefore, under (e)(2) to the extent of my deduction (100k), I do not have COD income."mplified. The form of entity may make a difference too, like what if this was a corporation which did not make an S election? I think the result is the same but you need to jump through more hoops to make the 100k deduction obvious.I could also be very wrong but this is my current understanding of the law.Sincerely,Michael Avanesian, Esq.Avanesian Law Firm101 N. Brand Blvd. PH 1920Glendale, CA 91203Tel: 818.276.2477 | Fax:818.208.4550
The post was migrated from Yahoo.
I am not a tax expert by any means. I had not seen that section before but
it deals with whether certain discharge of indebtedness had to be reported,
not whether the money is actually owed.
I would rely on IRC 108(e)(2) which says, "(2) *Income not realized to
extent of lost deductions* No income shall be realized from the discharge
of indebtedness to the extent that payment of the liability would have
given rise to a deduction."
Sincerely,
*Michael Avanesian, Esq. *
Avanesian Law Firm
101 N. Brand Blvd. PH 1920
Glendale, CA 91203
Tel: 818.276.2477 | Fax: 818.208.4550
*Confidentiality**: *This electronic transmission and its contents are
legally privileged and confidential information and intended solely for the
use of the addressee. If the reader of this message is not the intended
recipient, you are hereby notified that any dissemination, distribution,
copying or other use of this message and its contents is strictly
prohibited. If you have received this transmission in error, please reply
to us immediately and delete this message from your directory.
*IRS Circular 230 Disclosure:* To ensure compliance with requirements
imposed by the IRS, please be advised that any U.S. federal tax advice
contained in this communication (including any attachments) is not intended
or written to be used or relied upon, and cannot be used or relied upon,
for the purpose of (i) avoiding penalties under the Internal Revenue Code,
or (ii) promoting, marketing or recommending to another party any
transaction or matter addressed herein.
On Mon, Nov 2, 2015 at 3:09 PM, Holly Roark hollyroark22@gmail.com [cdcbaa]
wrote:
>
>
> Tax people, does this really mean what it seems to say? If a guarantor
> settles a debt or the lender charges it off, the guarantor does not incur
> cancellation of debt income?
>
> (7) Guarantors and sureties. Solely for purposes of the reporting
> requirements of this section,
> a guarantor is not a debtor. Thus, in the case of guaranteed indebtedness,
> reporting under this
> section is not required with respect to a guarantor, whether or not there
> has been a default and
> demand for payment made upon the guarantor.
>
>
> Holly Roark
> Certified Bankruptcy Specialist*
> *and Sports Lawyer*
> holly@roarklawoffices.com **primary email address**
> www.roarklawoffices.com
> *Central District of California & District of Idaho* - Consumer
> Bankruptcy Attorney
> 1875 Century Park East, Suite 600 Los Angeles, CA 90067
> T (310) 553-2600; F (310) 553-2601
>
> *By State Bar of California Board of Legal Specialization
>
>
>
>
I am not a tax expert by any means. I had not seen that section before but it deals with whether certain discharge of indebtedness had to be reported, not whether the money is actually owed.I would rely on IRC 108(e)(2) which says, "(2) Income not realized to extent of lost deductions No income shall be realized from the discharge of indebtedness to the extent that payment of the liability would have given rise to a deduction."Sincerely,Holly Roark
The post was migrated from Yahoo.