How does tuition assistance work?

Is my new employer's reimbursement of my old employer for tuition assistance taxable to me?

• My old employer had paid approximately $10,000 tuition assistance for me. I received a job offer from my new employer and accepted before working out my work commitment. The new employer agreed to pay off the amount I owed the old employer for not working out the agreement. Now, the new employer is telling me that is a taxable benefit to me since they are paying off a loan. I argue that it is still tuition reimbursement and at a maximum only the amount paid above $5,250 in one year should be taxable. They say the original reason I received the money is irrelevant and they must treat it the same as paying off a loan. I honestly don't think any of it should be taxable since it is tuition related and the courses were over a two year period. Do any of you have any advice in this area?

• Answer:

  Sorry. This doesn't have anything to do with tuition. Your employer loaned you money for something (in this case advancing you money for tuition, but what for doesn't matter). You have a debt to your former employer. Your new employer buys this obligation from your former employer. The holder in due course (your new employer) does not require you to make any payments, thus canceling/forgiving the debt. Debt cancellation is taxable income.