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I have seen threads here that address this issue, but have conflicting information. Some believe yet-to-be forgiven loans remain a liability on the tax return, while others say that it is considered tax-exempt income. I have seen no guidance from the IRS yet. Has anyone seen anything set in stone on this or are extensions the only option at this point?
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Why would you do an extension for that? At least for the federal, it is tax exempt income so even if you choose wrong, you aren't creating a tax liability in the wrong year. Personally, I'm going with the logic that if the loan wasn't forgiven in 2020, you still had a loan at 12/31/20 and the tax exempt income won't hit until 2021.
Slava Ukraini!
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I have a couple of clients whos' shareholder distributions will become taxable as capital gains if the loan is not considered income in 2020.
