Sometime in the past, Taxpayer A loaned Taxpayer B $100,000. However, no one can find the written debt instrument. Taxpayer B acknowledges that the debt exists, but given its possible unenforceability, takes the position that the appropriate amount for the debt is $50,000. The two taxpayers settle on $60,000 as the face amount of the debt. However, Taxpayer B is short of cash and is only able to pay Taxpayer A $40,000. What are the tax consequences to Taxpayer B? 

Answer rating: 100% (QA)

The tax consequences to Taxpayer B in this situation depend on whether the debt is considered cancel... View the full answer