If I resolve a dispute over an unpaid loan in a negotiated settlement, is the award tax-exempt?
This originally stemmed from a complaint over a loan from an ex-girlfriend. I filed the complaint, but now we are trying to solve the matter through mediation. I just am hoping that because any settlement would in effect be “repayment of the loan,” that the settlement proceeds would be tax-free.
Tags: award, dispute, loan, negotiated, Over, resolve, Settlement, taxexempt, unpaid
If the debt is cancelled it is treated as income. Line 21 of the 1040.
If this is money she owes you and she pays, the loan payment itself is not taxable. Interest and penalties would be.