Last year,taxpayer had a $10,000 business loan that was written off.Last year,taxpayer also had an NOL which taxpayer carried back two years and used in its entirety.If taxpayer collects the entire $10,000 during the current year,$10,000 needs to be included in gross income.

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When a written-off business loan is later repaid, the repayment is considered taxable income. This is known as cancellation of debt income (CODI). Since the taxpayer utilized the entire NOL to offset taxable income, they cannot use it again to offset the CODI, and the full $10,000 will need to be included in gross income.

Last Year,taxpayer Had a $10,000 Business Loan That Was Written