When a Discharge Isn’t a Discharge: A Proposal to Clear Up the Confusing 36-Month Non-Payment Testing Rule
If a lender makes a loan to a borrower, but ends up having to discharge the debt due to the borrower's bankruptcy or other qualifying trigger, then as far as the IRS is concerned, the discharged amount wasn't free money to the borrower —it's considered taxable income. How and when that discharged amount gets communicated to the borrower as well as the IRS can be a little complicated. AffirmX's Jane Pannier gives us the scoop on what is causing the confusion and how the IRS proposes to clear matters up. [10/28/14]
