The terms of the private loan were as generous as they were clear: With no money down, Justice Clarence Thomas could borrow more than a quarter of a million dollars from a wealthy friend to buy a 40-foot luxury motor coach, making annual interest-only payments for five years. Only then would the principal come due.

But despite the favorable nature of the 1999 loan and a lengthy extension to make good on his obligations, Thomas failed to repay a “significant portion” — or perhaps any — of the $267,230 principal, according to a new report by Democratic members of the Senate Finance Committee. Nearly nine years later, after Thomas had made an unclear number of the interest payments, the outstanding debt was forgiven, an outcome with ethical and potential tax consequences for the justice.

“This was, in short, a sweetheart deal” that made no logical sense from a business perspective, Michael Hamersley, a tax lawyer who has served as a congressional expert witness, told The New York Times.

The Senate inquiry was prompted by a Times investigation published in August that revealed that Thomas bought his Prevost Marathon Le Mirage XL, a brand favored by touring rock bands and the superwealthy, with financing from Anthony Welters, a longtime friend who made his fortune in the health care industry.

In a statement to the Times this summer, Welters said the loan had been “satisfied” in 2008. He declined to answer whether that meant Thomas had paid off the loan in full nor did he respond to other basic questions about the terms. But while a number of questions remain, he gave a much fuller account to the committee, which has the authority to issue subpoenas and compel testimony.

The documents he volunteered indicate that, at the very least, Thomas appears to have flouted an ethics rule requiring that he include any “discharge of indebtedness” as income on required annual financial disclosure reports. In addition, the IRS treats debt forgiveness as income to the borrower.

R&I – TP