When a judgement expires for a debt, is it treated as a forgiveness of debt and therefore a taxable event?

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When a judgement expires for a debt, is it treated as a forgiveness of debt and therefore a taxable event?

Asked on October 18, 2012 under Bankruptcy Law, Arizona

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

Technically under federal and state tax laws an actual judgment that a person owes that expires as a matter of law is deemed a foregiveness of debt if the debt is based upon a contractual obligation. If the debt is based upon a tort, it is not deemed a debt that would be a taxable event.


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