Business Law
Business Law News 2021, ISSUE 3
Content
- B-Law B-Law B-Law: Ethics for Business Lawyers - The No Contact Rule
- Beyond the Oath: Recommendations for Improving Civility - Initial Report of the California Civility Task Force
- Business Law News Editorial Team
- BUSINESS LAW NEWS Table of Contents
- Court of Appeal Delves into Bankruptcy Law; Did It Get It Right? Find Out at Your Own Peril!
- Executive Committee: Message From the Chair
- Executive Committee of the Business Law Section 2021-2022
- Message From the Editor
- Standing Committee Officers of the Business Law Section 2021-2022
- Toxicology of Alcohol: The Role of Toxicologists in Social Host & Liquor Liability
- Tax Issues with Lawyer Legal Funding
Tax Issues with Lawyer Legal Funding
Robert W. Wood
Robert W. Wood practices law with Wood LLP (www.WoodLLP.com) and is the author of Taxation of Damage Awards and Settlement Payments and other books available at www.TaxInstitute.com. This discussion is not intended as legal advice.
When you receive a loan, is the money taxable? Of course not, because you must pay back the money. That obligation prevents the loan money from being income. Of course, if the loan is later forgiven, that forgiveness can trigger tax, unless you can fall within one of the few exceptions to cancellation of debt income (such as bankruptcy or insolvency).1 Thus, loans aren’t taxed.
Can lawyers borrow too, just like anyone else? Of course, and, for that reason, many lawyers and litigation funders are fretting about Novoselsky v. Commissioner.2 In that case, a lawyer was taxed on litigation funding loans. It’s one of those classic bad-facts bad-law situations, and therefore, much of the hype needs explanation. In fact, this perfect storm is full of tax lessons.