The 2020 Coronavirus Aid, Relief, and Economic Security Act (CARES Act) created the Paycheck Protection Program (PPP) allowing S corporations and others to receive loans that may be forgiven. Is the forgiveness of PPP indebtedness taxable? Are expenses paid from PPP borrowed funds deductible? For S corporations and their shareholders, how are PPP loan forgiveness and related expenditures treated? Prepare a brief outline summarizing your answers to these questions.

Partial list of research aids:

Rev. Rul. 2021–2.

Consolidated Appropriations Act of 2021 (P.L. 116–260), § 276(a).