Paying off debt with services....
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Can a taxpayer pay off debt in the form of services? Example: A owes B $5,000. A pays off the debt by doing work in B's business. The service is valued at $5,000. Does A have any cancellation of debt income? Does the service provided satisfy the debt obligation and thus no cancellation of income?
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He would not have cancellation of debt income, he would have earned income equal to the $5,000 he owed.
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He would not have cancellation of debt income, he would have earned income equal to the $5,000 he owed.
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Depending upon the work performed and whether or not it fits the employee mold the labor trade may be subject to employment taxes as well.
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Thanks IRMN. I guess maybe the Gremlin felt I was not answering the question asked, which I did not. I added information not asked for. Probably it was information the Gremlin did not care to hear about.
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Mimbreno - the point gremlins are out again today. You had a negative point but I fixed that for you.