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WALLSTREETESQ
WALLSTREETESQ, Attorney
Category: Bankruptcy Law
Satisfied Customers: 17223
Experience:  14 years exp., CH 7 AND 13 Bankruptcy cases, AFL-CIO UNION PLUS, UFT NYSID AND ALL MAJOR UNIONS
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I HAVE TWO CONDOS THAT I FILED CHAPTER 7 BANKRUPTCY IN 4/2010.

Resolved Question:

I HAVE TWO CONDOS THAT I FILED CHAPTER 7 BANKRUPTCY IN 4/2010. DISCHARGE WAS IN 7/2010. I RECEIVED A 1099C ON BOTH CONDOS WITH CANCELLED DEBT AND A FMV. HOW IS THIS REPORTED ON MY INCOME TAX FOR 2010? CANCELLED DEBT WAS APPROX 26,000 EACH AND FMV IS 135,000. CAN YOU HELP? THANKS
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  WALLSTREETESQ replied 5 years ago.

WALLSTREETESQ :

Hello I am a licensed attorney here to help you with your question, please review my response and do not hesitate to ask for clarificati on

Customer:

Sorry this is my first time using just answer.com. Where do I view your response.

WALLSTREETESQ :

Cancelled debt through a bankruptcy does not have to be listed on your return as income,

WALLSTREETESQ :

a 1099 c for canceled debt after a bankruptcy discharge is not considered income

Customer:

Even on rental property? I was told to report the cancelled debt on line 21 (1040) fill out form 982 and report the sale on 4797.

WALLSTREETESQ :

IRC section 108 provides two pertinent exceptions. They include discharging the debt in bankruptcy and being financially insolvent just before the time of forgiveness. Insolvency simply means that the value of the taxpayer’s debts exceeded the value of the taxpayer’s assets immediately before the forgiveness of debt. The IRS has form 982, entitled “Reduction of Tax Attributes Due to Discharge of Debt,” that can be filed with a return to indicate the exception.

WALLSTREETESQ :

When the forgiveness of debt occurs in a bankruptcy case, Internal Revenue Code section 108(a)(1)(A) specifically provides that it is not to be treated as income. Thus, discharge of a debt through a bankruptcy proceeding is excluded from gross income for tax purposes.

WALLSTREETESQ :

You Can file IRS form 982, and claim the bankruptcy exemption

Customer:

Ok Thank you.

WALLSTREETESQ :

You can also write a simple letter to the IRS supported by a photocopy of the bankruptcy discharge order and the schedule containing the specific debt.

WALLSTREETESQ :

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