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?
He would not have cancellation of debt income, he would have earned income equal to the $5,000 he owed.
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.
Mimbreno - the point gremlins are out again today. You had a negative point but I fixed that for you.
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.
