The receipt of loan proceeds by a business is generally not included in gross income under the Internal Revenue Code. According to Section 61, gross income encompasses all income from whatever source derived, but loan proceeds are typically excluded because they represent a liability to repay rather than income. This principle is supported by the IRS FAQ, which states that the receipt of loan proceeds is not included in gross income. However, if the loan is forgiven, the forgiven amount is generally included in gross income unless an exclusion under Section 108 or other Federal law applies.
Section 108 provides specific exclusions from gross income for the discharge of indebtedness under certain conditions, such as insolvency or qualified real property business indebtedness. If a business receiving a loan under a government-established program has the loan forgiven, the forgiven amount would typically be included in gross income unless one of these exclusions applies. If an exclusion does apply, the business may need to reduce certain tax attributes, such as net operating losses or the basis of property, in accordance with Section 108(b).
In summary, funds received by a business as loan proceeds from a government-established loan program using Fund payments would not be considered gross income taxable to the business under the Code. However, if the loan is forgiven, the forgiven amount would generally be included in gross income unless an applicable exclusion under Section 108 or other Federal law applies.
Sources:
PLR 202138001
PLR 9249016
§ 61. Gross income defined
TAM 9308001
§ 108. Income from discharge of indebtedness
