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Feb 1, 2012 1:41 am

I have a couple of questions regarding forgivable loans.

Short story: I took position in mid 2011 as rep with branch office of an independent B/D.  The guy running firm is very very bad news from an ethics standpoint.... and I am planning my exit.

I took a small forgivable loan of 17K, that is forgivable over 5 years based upon certain production requirements being met.  My plan has been to write a check back to the branch and walk away.

Today, I received a 1099 for the entire 17k. this generally how these loans are handled?  Seems that the portion forgiven each year would be considered taxable....but not 100% in year one.  Is anyone on this forum familiar with this area.

Also, if the entire amount is considered income in year one, would that not mean there is no more note??

Finally, and here is the legal question, can a branch manager (OSJ) of an independent firm do anything to damage a reps U4 or would that have to come from the B/D.

Thank you in advance for anyone willing to take their time to offer their thoughts. 

May 8, 2012 10:26 am

Standard procedure at the firms I have been at is to 1099 what is forgiven that year. You should have them amend the 1099, then they will have to state how much was forgiven that year and you will know what the remainder is that you have to pay back (don't forget to plan on a little interest).

Look at the terms of the forgivable note, it should state: Each year’s forgiveness of the Loan will result in a Form1099 being issued to the rep annually for the amount forgiven that tax year.

I think it is probably wishful thinking that there is no more note, it is my opinion you will be held to pay back the note no matter what the 1099 says. 

In regards to the final question, yes I have seen OSJ's hit U-5's with Yes disclosures on the way out. I am pretty sure it came from the OSJ without the BD's input, but the BD had to be notified and given documentation on why there was a Yes.

Disclaimer: This post does not constitute legal advice

Dec 13, 2012 5:32 am

Does anyone know how long a company has to collect or request a demand notice on a promissory note / forgivable loan. It has been over 5 years since leaving my former B/D and every day for the last 5 years I keep going to the mailbox expecting to find a letter from them requesting payment. If I have not heard from them directly do I have any obligation on my end to contact them regarding payment? I know they can charge interest on top of the payment but if I have never heard from them can they enforce payment and interest 3, 5, or 10 years later???