Arkansas Administrative Code
Agency 006 - Department of Finance and Administration
Division 05 - Division of Revenues
Regulation 1997-4 - Comprehensive Individual Income Tax Regulations
Rule 26-51-404 - GROSS INCOME GENERALLY
Rule 1.26-51-404(b)(11) - Cancellation or Forgiveness of Debt

Universal Citation: AR Admin Rules 1.26-51-404(b)(11)
Current through Register Vol. 49, No. 9, September, 2024

The cancellation and forgiveness of indebtedness may amount to a payment of income, to a gift or to a capital transaction, dependent upon the circumstances. If, for example, an individual performs services for a creditor who in consideration thereof cancels the debt, income to that amount is realized by the debtor as compensation for his services. If, however, a creditor merely desires to benefit a debtor, and, without any consideration therefore, cancels the debt, the amount of the debt is a gift from the creditor to the debtor and need not be included in the latter's gross income. If a shareholder in a corporation which is indebted to him gratuitously forgives the debt, the transaction amounts to a contribution to the capital of the corporation.

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