Tax consequences of the reduction

Reference no: EM13972688

Helena has assets of $130,000 and liabilities of $160,000. One of her debts is for $120,000. Discuss the tax consequences of the reduction of this debt in each of the following circumstances:

a. The debt was incurred by Helena for medical school expenses. She borrowed $120,000 from her grandfather, who agreed to reduce the debt to $80,000 because Helena had done so well in school.

b. The debt was incurred to buy property used in Helena's business. To help Helena get back on her feet, the bank that loaned her the money agreed to reduce the debt to $80,000.

c. The debt was incurred to buy equipment used in Helena's business. Because the equipment did not perform as advertised by the manufacturer who had financed the purchase, the manufacturer agreed to reduce the debt to $80,000.

Reference no: EM13972688

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