Tax,
Law Practice
Jun. 2, 2021
Litigation funding now, taxes later, why not?
If your uncle, best friend or bank loans you money, is it taxable? Nope, not if it’s a real loan. But the loan or income distinction lands many people in trouble with the IRS.
Robert W. Wood
Managing Partner
Wood LLP
333 Sacramento St
San Francisco , California 94111-3601
Phone: (415) 834-0113
Fax: (415) 789-4540
Email: wood@WoodLLP.com
Univ of Chicago Law School
Wood is a tax lawyer at Wood LLP, and often advises lawyers and litigants about tax issues.
If your uncle, best friend or bank loans you money, is it taxable? Nope, not if it’s a real loan. But the loan or income distinction lands many people in trouble with the IRS. Besides, interest rates on risky loans like litigation funding and pre-IPO stock are high, and you might not be able to deduct the interest. Even worse, if a loan is forgiven — even a nonrecourse loan — it is cancellation of debt income. The tax code says not having to pay back a loan is just li...
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