OIC – EIDL and PPP Loans

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    Mark Roelke
    Participant

    Clients are married. They owe the IRS $300k. Husband has a sole prop business (separate EIN) that received an EIDL ($500k). $485k is in the business bank account. Even though EIDL proceeds can be used to pay a borrower’s tax debt, they can’t be distributed to the owner. I think we should show the bank account balance in the offer and exclude the funds from Available Business Equity in Assets (Box B) of H&W’s OIC. Does any one have experience with the OIC unit excluding/considering sole prop EIDL funds in a personal offer?

    In 2021, Husband’s business (commercial janitorial in San Francisco) has negative net operating income (-$13k). Revenues are down significantly both in 2020 and 2021 because of Covid. However, the 2021 YTD P/L shows a profit ($44k) because $57k of 2020 PPP Loan #1 was forgiven and is included as “Other Income”. I’m aware that PPP Loan forgiveness income is not taxable (RR-2021-02). I am not sure if we can successfully exclude that income from the OIC -arguing under IRM 5.8.5.20 that future income will be different from current income. Does any one have experience with the OIC unit’s treatment of exclusion of income from PPP (or other) loan forgiveness?

    Is there other IRS guidance that I missed?

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