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I have a quick question about promissory notes. My company…

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I have a quick question...
I have a quick question about promissory notes. My company is loaning me $21,000 for a short time frame. I am to pay the loan back within 12 months. Do I owe tax on the $21,000 when it is paid back?The loan is structured to include 1.5% interest and the terms of the loan are all in the document. From what I can tell I am only charged tax on the $21,000 if the loan is forgiven and I don't owe the debt. Is that correct?
Submitted: 7 months ago.Category: Tax
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10/2/2017
Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 7 months ago
Chad EA, CFP ®
Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional
Category: Tax
Satisfied Customers: 2,312
Experience: Federally licensed IRS Enrolled Agent, Certified Financial Planner (R), MBA
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Welcome to Just Answer! My name is ***** ***** I will be able to assist you today.

You would not owe tax on a loan you pay back. You are correct to say you may have to pay tax if the loan was forgiven and the debt canceled.

For your convenience I have placed a link below for further information regarding canceled debt. Tax Topic 431 from the IRS "Canceled debt - is it taxable or nor"

https://www.irs.gov/taxtopics/tc400/tc431

"If your debt is forgiven or discharged for less than the full amount you owe, the debt is considered canceled in the amount that you don't have to pay. The law provides several exceptions, however, in which the amount you don't have to pay isn't canceled debt. These exceptions will be discussed later. Cancellation of a debt may occur if the creditor can't collect, or gives up on collecting, the amount you're obligated to pay. If you own property subject to a debt, cancellation of the debt also may occur because of a foreclosure, a repossession, a voluntary transfer of the property to the lender, abandonment of the property, or a mortgage modification"

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Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 7 months ago

If you have any further questions please let me know.

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Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 7 months ago

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