D I have to pay taxes on the $3750.00 if I have already paid taxes on this money? Will have to pay taxes on this again?

[jbaugher21]

When I left my work my contract stated that if I left I would have to pay back $3750.00 on my advance that was already taxes.  They sold my book of business for $1066.00 and they put the remaining amount on line 7 on my 1099 misc form.  I claimed hardship so I didn't have to pay it back.  If I was already taxes on this, why am I being taxed again?

[DDollar · Accepted solution]

There were two separate events: 1) Payment of ages, and 2) Forgiveness of Debt.  You had to pay tax the first time because you were paid the $3,750. When you left, you were obligated to pay it back, but when you claimed the hardship, the debt was forgiven.  Debt forgiveness is considered a taxable income.  From a tax perspective, these two items are looked at as two separate, mutually exclusive events.