I've seen this issue from a few perspectives.

The first is from some of my clients who opened practices down in Cape Cod. The hospital was looking to attract new doctors, so they gave doctors who would open a practice down the Cape an income guarantee for a year or so which was written as a loan, and then forgiven over the subsequent three years, assuming the doctor continued to practice down there.

Each year, they would send my client a 1099-Misc reflecting the pro-rata share of the loan that was forgiven. They also gave my client a 1099-Int to report the imputed interest on the outstanding balance of the loan. Since my client never paid any interest on the loans, they ended up reporting that amount as interest income on their tax forms.

The second perspective is convoluted tax planning at its best. For a while, I had a number of people ask me this: If I get a loan so I can practice in a certain area, and then if the loan is forgiven as I work a certain length of time, that amount should not be taxable due to the following specific tax rule. In certain instances, organizations can provide student loans to people who are in medical school, forgive the loans as that person meets certain criteria upon completing medical school (such as working in an underserved area for a set number of years), and the loan that is forgiven is not taxable.

Here's the catch. That loan forgiveness provision must be written as part of the student loan, and given to the person in connection with paying for their education. Getting a loan as part of a new job doesn't qualify for this tax-free loan forgiveness treatment, based on my understanding of the tax rules.

Best of luck with your new job.

Zip Code: 01801

Thanks for the advice - even if it means we'll have to pay a lot in taxes This message board is a great resource!!

Zip Code: 52246