Given trees to pay off a personal loan to a friend

QUESTION: Hello: A friend owes me $10,000 for money I have loaned him over the last few years. He doesn't have the money but has some trees on his property that could be cut to pay off the money owing. If the cutter writes a cheque to me for the money owing, do I have to pay tax on this? This is basically money that I owed him that has been taxed previously. He is basically giving me the trees in exchange for the money he owes me. Thanks for your time, not sure where you find all the time to do this but it sure is appreciated.


david ingram replies:

I had already answered this week's free questions but yours tweaked my interest.

YOU do not owe tax on the money for the trees.

He, on the other hand DOES. He has a capital gain for trees sold if a one time deal and owes straight income tax on the value if he has done it as a business as in a wood lot.

Congratulations. I wish a coupl;e of people who owe me money had some trees to sell.