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Michael B.

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Q: Hi,

What are the tax implications if assets are used to repay a debt instead of an actual cash payment?

An example below:

A loan is provided by party A of $10,000 with 20% interest to party B.

Party B cannot repay and so they hand over a car valued at $12,000 to party A and the agreement is extinguished. No cash has changed hands.

Does party A have to put their hand in their pocket and pay tax after receiving the car?

Thank you.