Tax consequences of forgivable loan?

[midjd]

I applied for my law school's loan repayment assistance program, and the award letters are being mailed out next week. Here is the description of the program from the school website:

LRAP awards are made in the form of a forgivable loan. The recipients will sign a promissory note for this loan and MUST retain eligibility for 1 year in order to have the loan forgiven. Recipients maintain eligibility by remaining in qualified employment, with an eligible salary, and show that their student loan payments are in good standing. Recipients will be notified to submit required documentation regarding eligibility for forgiveness 1 calendar year following disbursement of the award.

So, I'm certainly not counting on getting any specific amount, but I did want to know what the tax consequences would be upon forgiveness of the loan (appx. October 2012). Maintaining eligibility should not be a problem.

Thanks in advance!

[❤ mollymouser ❤]

Have you looked at 26 U.S.C. § 108(f)?

[❤ mollymouser ❤]

www.irs.gov/publications/p970/ch05.html may be of some help.

[midjd]

Thanks, Molly! ;D

[mwcpa]

more specifically look at IRC §108 Income from discharge of indebtedness (f) Student loans

"In the case of an individual, gross income does not include any amount which (but for this subsection ) would be includible in gross income by reason of the discharge (in whole or in part) of any student loan if such discharge was pursuant to a provision of such loan under which all or part of the indebtedness of the individual would be discharged if the individual worked for a certain period of time in certain professions for any of a broad class of employers"

there are lots of rules.... so be careful....should be a good research project for the up and coming attorney.... or seek qualified professional assistance...