Again, was it some kind of lending
law change or something like that that prompted or forced the org to
"forgive" loans?
Before the arrangement, the
KHs were paying back a loan. After the new arrangement, it’s not considered a
loan, it’s considered a contribution or a gift.
If I have a business that
lends money, I have to report it as business income. The WT does not want to be
labeled as a business. But if several people give me money, I have no business,
someone was just nice enough to give me a gift and the giver is responsible for
paying the tax on the gift, not me.
Who pays the gift tax?
The donor is generally responsible for paying the gift tax. Under special
arrangements the donee may agree to pay
the tax instead if he wishes.
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes#1