FmHA Forgiven Debts
GGD-94-25R: Published: Nov 10, 1993. Publicly Released: Nov 10, 1993.
- Full Report:
Pursuant to a congressional request, GAO reviewed information on loans that have been forgiven by the Farmers Home Administration (FmHA) and other government agencies, focusing on: (1) the tax implications of debt forgiveness; (2) whether forgiven debts are taxable; and (3) the implications of taxing such debts. GAO found that: (1) taxpayers are required to report their forgiven debts as income; (2) forgiven debts are considered taxable income, but there are exceptions if the debt is forgiven under bankruptcy proceedings, if the debtor is insolvent, if the debt is a qualified farm debt held by an unrelated lender, or if the debt is a qualified real property debt; and (3) taxpayers who did not report forgiven debts as taxable income are able to pay additional taxes, since they have above average incomes and sufficient funds to pay taxes on their other income.