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1099 and personal guarantee - exception under CFR
This issue was litigated in the past with one court agreeing with your
analysis. The IRS disagrees.
Income is defined in IRC 61. #12 says, "(12) Income from discharge of
indebtedness;"
The Owner owes this money, the obligation is forgiven, why is it not
income? Your argument, and it is a good one, is that the Owner never
received money. The IRS's position is, where does it say owner had to
receive the benefit/money? The definition of income is meant to be broad,
it encompasses a lot of things.
Assuming it is income, then income tax must be assessed unless there is an
exception. Section 108 contains those exceptions. Subsection (e)(2) fits
the bill.
The analysis is different but the result is the same.
Sincerely,
*Michael Avanesian, Esq. *
Avanesian Law Firm
101 N. Brand Blvd. PH 1920
Glendale, CA 91203
Tel: 818.276.2477 | Fax: 818.208.4550
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On Tue, Nov 3, 2015 at 12:19 PM, sam@southbaybk.com [cdcbaa] wrote:
>
>
> Just to demonstrate my total ignorance - I've always just assumed that,
> since the guarantor by definition did not receive the proceeds of the loan,
> the cancellation of the indebtedness likewise would not result in income to
> the guarantor. Is that too simple of an analysis?
>
>
This issue was litigated in the past with one court agreeing with your analysis. The IRS disagrees.Income is defined in IRC 61. #12 says, "(12) Income from discharge of indebtedness;"The Owner owes this money, the obligation is forgiven, why is it not income? Your argument, and it is a good one, is that the Owner never received money. The IRS's position is, where does it say owner had to receive the benefit/money? The definition of income is meant to be broad, it encompasses a lot of things.Assuming it is income, then income tax must be assessed unless there is an exception. Section 108 contains those exceptions. Subsection (e)(2) fits the bill.The analysis is different but the result is the same.Sincerely,Michael Avanesian, Esq.
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