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What is the Cancellation of Debt filing on US Income Taxes?
I filed Chapter 13 back in 2009. I finished my payment program last year (7/01/2013 was the last payment). I received notice that the Home Mortgage that was cancelled through my Chapter 13 is considered as Income and I must File it on my 2013 Taxes, even though I didn't receive anything in Income from the Mortgage Holder when they sold the Home.
Am I facing a Catch-22 or what?
Plus, what other debts that were discharged, must I report as Income? For example Credit Card Debt and Home Owners Association Dues.
3 Answers
- ?Lv 77 years agoFavorite Answer
The DEBT that was discharged in bankruptcy (it doesn't have to be your house) meets an exception for form 982.
HOWEVER, you must reduce your tax attributes in part II of the form. See IRS publication 4681 for examples, but if you get confused you will need professional help.
- 7 years ago
Anything that you receive a 1099-C on must be claimed on your taxes as an income. However, if you can prove insolvency, you can write off some of that debt. Just remember when trying to prove insolvency that you only include the totals as of the day just before the debt was cancelled. The IRS will come back at you if they feel you are lying! Make sure to always have paper proof of what you write down.
- troLv 77 years ago
no this is not a Catch 22
if this was your residence look at for 982 which may allow you to exclude it
