InDisputes: Debt Forgiveness – Taxpayer Appeals Unusual Reasoning

The Tax Appeal Commission ("TAC") recently held that debt forgiveness created taxable income for a taxpayer. Although the conclusion may be correct based on the specific facts of the case, the technical approach means that a successful appeal may be possible.

Background

In 2007, a property development company received a bridging term loan (15 months) to purchase specific development land. The development did not proceed and the term was extended on multiple occasions. During this time, the taxpayer claimed tax deductions for the impairment of the land (which was held as trading stock) in its financial statements. In 2016, the bank agreed to forgive the €6,043,555 loan balance. Irish Revenue asserted the €6,043,555 forgiveness created taxable income for the taxpayer.