Payment on Guarantees

Date
1991-05-10
Authors
Harl, Neil
Harl, Neil
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Harl, Neil
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With the onset of financial and economic trauma in agriculture in the mid 1980s, the matter of loan guarantees assumed greater importance than at any time since the 1930s. In a typical situation, a parent has guaranteed a machinery or livestock loan; if the child is unable to pay as the primary obligor, the parent may be elevated to a position of primary liability. The question then becomes whether the parent as guarantor has a bad debt deduction if the parent makes good on the loan. If the parent does not pay, and instead manages to negotiate a discharge of indebtedness, the question becomes whether the parent as guarantor has discharge of indebtedness income.

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