The bill clarifies that Gross income does not include any amount that would otherwise arise from the forgiveness of a PPP loan, emergency EIDL grants and certain loans & repayment assistance, as provided by the Cares Act.
Deductions are allowed for otherwise deductible expenses paid with the proceeds of a PPP loan that is forgiven, as well as for business expenses paid with emergency EIDL grants and advances.
Tax basis and other attributes of the borrower’s assets will not be reduced as a result of those amounts being excluded from Gross income. Partner’s tax basis would be adjusted by the distributable share of the deductions attributed to forgiveness.
A similar treatment is also applicable to the Second Draws of PPP loans, effective for tax years ending after the date of enactment of the provision.