Amtz-no Payments

[gman]

Have A Client Who Purchased A Business From A Parent And Has Been
Amoritizing The Goodwill. The Client Has Not Made A Payment On
The Business For 2 Years Now. The Dollar Amount Is Significant(10,000)
On Amortization. Would You Continue To Take This Amt Deduction??

Maybe The Parent Will Eventually Forgive The Entire Purchase
Amount???

[Bees Knees]

You continue to deduct expenses as long as you have basis. If the debt is forgiven, it would be taxable income to the one whose debt is forgiven. If it is converted into a gift, the donor would have to file a gift tax return.

The only situation where you would no longer deduct the costs associated with the debt is if it was a nonrecourse debt where the taxpayer is no longer at-risk for the debt, other than through debt forgiveness or a gift.

[Don B]

GMan,

Why do you capitalize every word in a sentence?

[JON]

Quickly

I do believe you can elect to reduce the basis in assets purchased and not have a forgiveness of debt. Much the same way as buildings were reduced in value back in the days when lenders discounted mortgages to keep owners in there. Has to do with acquisition debts and reducing the basis of the assets acquired with the debts...

[Bees Knees]

Basically, reducing the basis vs. paying tax on debt forgiveness and continuing to deduct the expenses would produce the same result. That is the purpose behind making you pay tax on debt forgiveness - because you may be using the debt to fund deductible expenses.

[JON]

Timing

If you want to accelerate taxes. Amortize over 15 years and take the income now. I do not know when I would suggest that.