Discussion:1099 C Cancellation of Debt
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Discussion Forum Index --> Tax Questions --> 1099 C Cancellation of Debt
| 20 December 2006 | |
| I have a client who filed Chapter 7 bankruptcy. A second mortgage was included in the bankruptcy. The client received a 1099 C for the second mortgage. They didnt include this in their tax return. They received notice from IRS that it is income. Can't they just send a copy of the bankruptcy papers to the IRS? Should this have been income? I say no. Any suggestions on what to do withe the notice from IRS? Thanks in advance....Rena | |
| 20 December 2006 | |
| Tell IRS client was insolvent at time of debt cancellaiton with appropriate documents. This should clear it up. | |
| 20 December 2006 | |
| Wheatley: Take a look at Sec. 108(a)(1)(A) that provides that cancellation of indebetness income is not includable in taxable income if the COD income is from discharge during a bankruptcy. Assuming that you're responding to a CP2000 notice, I would fax the IRS a copy of the bankruptcy filing that shows the debt listed & the discharge order. -- Larry Hess, CPA | Albuquerque, NM - Talk to me | |
Thejoester (talk|edits) said: | 7 February 2007 |
| I am in a similar situation. I filed chapter 7 and was discharged. I have recieved two 1099-c forms from the credit union that I had a car through and a line of credit that was included in the bankruptcy.
I read the tax law you quoted ( Sec. 108(a)(1)(A) ) and it states that the income is excluded in a title 11 case, how does this differ from my title 7? Thanks for any help you provide | |
| 7 February 2007 | |
| Title 11 refers to the US Code on Bankruptcy. Not the same question as Chapter 11 or Chapter 7 (which are chapters in Title 11). | |
| 16 February 2007 | |
| I just have a question. My son I am guessing did not pay some credit card bills and Citi Bank sent 3 1099-C forms written as
Account # Date of cancellation Amount What is this and does he have to file these papers? It was not on a regular form. It totals in the neighborhood of $7000. I did his taxes where he only grossed $13,000 | |
| February 16, 2007 | |
| He's grossed more than that now I'm! That goes on line 21 for other income I hate to tell you. You knew that, but hoped you were wrong. Unless he's insolvent or bankrupt. | |
| 16 February 2007 | |
| If you have already filed his taxes for 2006 then his return will have to be Amended to include the $7,000 in income, unless he was insolvent when he received the 1099-C's. Better consult a tax professional. | |
Death&Taxes (talk|edits) said: | 16 February 2007 |
| But then can he find out how much of the 7K was interest? That interest probably was personal and could not be deducted and should not be income. | |
| 16 February 2007 | |
| Thank you for your answers. He was a waiter and had lost his job. He will have to pay the $1090 then. I just didn't understand. I appreciate you taking the time to help. | |
| 16 February 2007 | |
| The paper is just like a piece folded in half.
Account # 000000 000 0000000000 2 $3176 Date 02/02/06 1 Credit Card 5 It has no boxes on it It looks just like the above. So I didn't know if that was all taxed or not and he received 3 of them | |
Lsizerfvsu (talk|edits) said: | 29 April 2007 |
| Can someone answer this? If you complete a cancelation of debt form 1099-C, are you still obligated to pay the lender who sent you the form the full amount of what was on the form? | |
| 29 April 2007 | |
| Most likely not....the 1099-c is reporting that which is uncollectible. But there may be legal ramifications of this...if you repay the amount on the 1099-c, then you are allowed the deduction from payment of this and they must pick it up as income...but an attorney needs to advise whether or not you are going to have to pay it in the future | |
| 31 January 2008 | |
| ariean77
Can someone help me? I am disabled and draw disability. My husband has to pay taxes on my benefits yearly. I have no income so to speak. I received a 1099-C for less than 2600.00 and I don't know what to do. | |
| 31 January 2008 | |
| have you discussed this with your tax preparer, Ariean? They should know exactly what to do. | |
| 31 January 2008 | |
| Ariean77: You would have to report it as income unless you are insolvent or filed for bankruptcy. | |
| 1 February 2008 | |
| I'm not sure if this is an odd case or not, but my wife and recieved a 1099-C for a debt that was cancelled on 06/28/2007. Our bankruptcy was discharged on 09/2005. First off, isn't that too long to wait to provide me with a 1099-C? And secondly, because box 6 is checked as Bankruptcy, do I need to complete form 982? I really appreciate any help we can get as we have already filed our taxes for 2007. Thanks! Michael | |
| 1 February 2008 | |
| If you receive a 1099 C (cancellation of Debt ) and are eligible for an exclusion due to bankruptcy or insolvency, I highly recommend you complete form 982 "Reduction of Tax Attributes due to discharge of indebtetness " and attach to your tax return. This will generally keep IRS off your back because it has the affect of nullifying the 1099 C from received . | |
| 1 February 2008 | |
| My client had over $900,000 of debt cancelled in 2007. We have not received a 1099-C. I guess it will need to be issued before 2/29? OK, so for bookkeeping we debit the N/P and credit cancellation of debt income. How is this to be reflected on his LLC return if he has filed under Chapter 7? The return needs to balance. Specified other income which flows through to his 1040 and then is excluded??
Thanks TW | |
| 20 March 2008 | |
| I have a client who is a limited partner his K-1 included COD income. Shouldn't this debt be considered non-recourse since he his a limited partner. Therefore this income would be part of the capital gain | |
RoyDaleOne (talk|edits) said: | 21 March 2008 |
| http://www.taxalmanac.org/index.php/Discussion:Cancelation_of_Debt_Income | |
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