So, how much trouble do you think I'm in? I'm sole shareholder of an S corp that is, once I pay back a business credit card, 100% insolvent.

Over the years, I've taken out $50k in shareholder loans. This I know I'm on the hook for and there's no way I can pay this back in a lump sum now. I know I'll take some sort of tax hit on this (I'm pretty sure it will have to be taxed as income, as I recall, speaking with my accountant).

S Corp has a maxed out business line of credit of 50k with no personal guarantee. They've called the full amount due last month.

1. Is the IRS going to treat the 1099 for forgiven debt that is the responsibility of the S corp as income?

2. Because of the pass-through nature of the S-corp, is this debt going to be considered income, attributed to me personally? If I have $100k of extra "income" on my returns this year, I should go visit some personal bankruptcy forums