debt forgiveness

Dictionary of Banking Terms for: debt forgiveness
debt forgiveness

reduction in loan value when a loan is discounted from its original principal or charged off as a bad debt. As an example, a $100,000 loan, if discounted to $90,000, yields a debt forgiveness amount of $10,000. Under IRS rules that $10,000 is reportable as income to the borrower for loans discounted or charged off.

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