Client's S-corporation had an investor that invested approximately $30,000 about 3 years ago. This was to help my client/s-corp develop a certain product, which he did. In return, the investor did not seek monetary repayment but instead had my client repay by rendering services in the investor's business. Last year the services my client provided was about $5,000. I posted about this last year and was decided that the $5,000 was income to the s-corp. Which is how I reported it.
The investor passed away in 2013 and my client stated that investor's estate has wiped away the remaining investment that was left, about $25,000.
Since the investment has been cleared and my client will not have to repay the estate either monetarily or by services rendered, would this be considered cancellation of debt?
If so, could this COD be spread out over a 5 year period using Deferred Cancellation of Debt Income (IRC ยง108), page 14-14 in TTB.?
Thank you for any help
The investor passed away in 2013 and my client stated that investor's estate has wiped away the remaining investment that was left, about $25,000.
Since the investment has been cleared and my client will not have to repay the estate either monetarily or by services rendered, would this be considered cancellation of debt?
If so, could this COD be spread out over a 5 year period using Deferred Cancellation of Debt Income (IRC ยง108), page 14-14 in TTB.?
Thank you for any help