I hope this isn’t true about John Oliver’s medical debt forgiveness

In short, here’s what happened. As part of his segment on debt collectors, Oliver formed his own debt-collection company. Through that company, he then bought just under $15 million in medical debt — the debt of about 9,000 people — for $60,000. Once that debt had been bought, Oliver forgave it. Then, in a moment of self-adulation, he showered the stage with dollar bills as a symbol of his good act.

OK, it’s an intern at National Review writing this so details, details.

But if it was a company forgiving that debt than those whose debt was forgiven owe taxes on that debt forgiveness.

If it were a charity or an individual making a charitable act then they don’t. But corporations are assumed, unless otherwise detailed, to be operating for profit. And a for profit organisation forgiving debt is income to the debtor who gains that forgiveness. And taxable income too.

I do hope that Oliver got this the right way around.

Update: Apparently he donated it to a charity that then forgave it. So, settled then.

7 comments on “I hope this isn’t true about John Oliver’s medical debt forgiveness

  1. Even if he did it through a corporation, the taxes owed should still be less than the debt itself so they’d have come out ahead anyway.

  2. OTOH, if you bought $15 mil of something for 60k then nobody was really expecting these people to pay it back at all.

  3. For me this was the take-away line:

    Of course, there’s no such thing as free money, and somebody has to cover the $15 million in debt that has gone unpaid (and would have gone unpaid regardless of Oliver’s stunt). As Joe Carter argues, the cost of unpaid debt is passed on to hospitals, who in turn pass it on to their patients in the form of higher taxes, higher prices for care, and higher insurance costs. In fact, those costs had already been passed on to consumers before Oliver even considered “forgiving” the debt.

    There ain’t no such thing as free money. Someone pays.

  4. In the UK there are provisions in the Taxes Acts to write off bad debts

    But in any case he’s writing off the cost of the debt he purchased which is only the $60,000 he paid for it

  5. That’s his tax write off. The IRS states that it’s the original amount which is taxable to the debtors.

  6. Agammamon,

    Yes the taxes would have been less than the debt; but the government is a lot less forgiving than private creditors. Instead of the occasional debt-collector hounding them, they’d be threatened with prison, and they’d have the tax due deducted from their wages at source. The state isn’t just courageous – it’s vicious.

  7. Can you set up a company (as US Corp) without the intention of engaging in actual trade or commerce? In the UK aren’t charitable donations classed as a distribution so how can you make a donation if it exhausts all your capital?

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