Legal Question in Real Estate Law in Tennessee

Do I owe taxes on a loan that I never received?

I purchased three log cabins from a company that went bankrupt and the bank contacted me due to their not having access to the titles for my cabins. The original loan was for $45,000 the bank and I agreed that I would pay $14,000 and the bank would write off the rest. Now the IRS says I owe $4,982.00 on taxes of the original $45,000 loan. Is this correct. I never used the money of that loan.


Asked on 8/29/07, 2:00 pm

1 Answer from Attorneys
KJW Firm PLC

Re: Do I owe taxes on a loan that I never received?

Forgiveness of a loan is equal to income in the eyes of the IRS. Since the bank gave you $45,000 and you are only required to pay back $14,000, the IRS sees the $31,000 write-off as income to you.

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Answered on 8/30/07, 8:45 am


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