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Posted by newberry on December 7, 2006, 8:30 am
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Premise: I own stock in an S corp for many years. A
stockholder/partner in the same S corp lends me money and I
give my stock to that partner as collateral. I have 6 month
term to either pay back loan or give up stock . 6 months
goes by & I give up stock in lieu of paying back the money.
Do I pay long term capital gains on stock as if it was sold
or do I suffer with short term tax gain as a debt forgiven.
(Not being an accountant I am only assuming that a debt not
paid and than forgiven is taxed as short term gain). (Of
course, my debt is not really forgiven as I gave up valuable
stock!) Forgive my ignorance on this as I am not an
accountant.
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