[quote=UCGal]My first thought when I read this is
* I need to get a better/nicer/richer class of relatives or friends… 😉 The one big loan I took from my parents I had to pay back with fully amortizing interest and the grief/shame of missing a payment was worse than any collection agency… Bank of Dad was harsh!
* the second thought was that it was an estate planning tool. (Like Brian suggested and SDR slammed him for.)
* then I see flu was thinking the same thing.[/quote]
Well, I was just asking because I don’t understand the intricate details of collecting on a debt (haven’t not been in trouble with debt myself).
I guess my followup question would be
1)If said person just defaults, can the creditor go through the motions of forgiving this loan while at the same time opting out of wrecking the person’s credit at the same time?
2)And the rules around loan forgiveness in lieu of the current climate, I’m wondering if they are drastically different now versus before in which loan forgiveness was a taxable event.
Maybe I’m not being clear enough, but I was wondering if someone would shed some light where I’m going with this….
Specifically:
“This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.
“
