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Tax Flash


Taxpayers who received loans through the Paycheck Protection Program (PPP) should be aware of the critical tax consequences relating to the forgiveness of these loans.

The PPP was created by Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which provides that an eligible recipient of a covered loan could qualify for forgiveness of the indebtedness if certain criteria are met. What’s more, the forgiven loan is not included in taxable income.


Initially, this sounded like a win-win situation for taxpayers: free money to help them get through the unexpected economic challenges created by the coronavirus pandemic. The IRS, however, threw a curveball when it released Notice 2020-32 and decisively ruled that expenses allocable to the forgiven PPP loan proceeds are not deductible.

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