In 2013 Betty loaned her son,Juan,$10,000 to help him buy a car.In 2014,before he repaid the $10,000,Betty told Juan that she was "tearing up" the $10,000 note as a graduation present.How should Juan treat the amount forgiven?

Question

Quizplus · Accepted Answer

The amount forgiven by Betty should be treated as an excludable gift in the year of forgiveness. Since Betty forgave the loan as a graduation present, it should be considered a gift, and gifts are generally not taxable income. Therefore, choice D is the correct answer.

In 2013 Betty Loaned Her Son,Juan,$10,000 to Help Him Buy