Page 45 - Other Income for Individuals

Cancelled Debt

Stockholder Debt

If you’re a stockholder in a corporation

and the corporation cancels or forgives
your debt to it, the canceled debt is a

constructive distribution that’s generally
dividend income to you. $
For more information, see Pub. 542,

Corporations.
If you’re a stockholder in a corporation

and you cancel a debt owed to you by the
corporation, you generally don’t realize
income.

This is because the canceled debt is
considered as a contribution to the capital

of the corporation equal to the amount of
debt principal that you canceled.

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