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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
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Experience:  Bankruptcy professor.
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I filed my Title 7 Bankruptcy this year of 2011. I have already

Resolved Question:

I filed my Title 7 Bankruptcy this year of 2011. I have already had the 341 hearing and anticipate it being finalized in a matter of days.

I am about to file my 2010 tax return which is due on October 15th with the appropriate extensions.

In 2010 I received 1099's for "cancelled debt" on investment properties totalling almost a million dollars. My lawyer listed all of these on the bankruptcy and the initial response from the court is that these debts from which this "phantom income" eminated has been all forgiven through the bankruptcy.

My question is how do I appropriately fill out the 1040 tax form so I do not owe any tax on this "phantom income"?

I am guessing to use the 982 form, but I do NOT see "bankruptcy" anywhere, only "discharge of indebtedness in a title 11 case" and "discharge of indebtedness to the extent insolvent NOT in a title 11 case"

What do I do?

Thanks you
Submitted: 2 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 2 years ago.
Hi JACustomer,
IRS form 982 is the correct form to use to have your 1099-C debt excluded from income for tax purposes.
"Title 11" is the US Bankruptcy Code, so you would check item a (Discharge of indebtedness in a Title 11 case) on line 1 of form 982.

I think this is what you wanted to know. If not, please let me know.
Thank you!



cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience: Bankruptcy professor.
cfortunato and other Bankruptcy Law Specialists are ready to help you
Customer: replied 2 years ago.

Hello,

 

I am an attorney also, I know, I know...the worst people to have as clients right? : )

 

My query goes to two issues, the first procedural which I believe you have partially answered (I just wish to flesh it all out) and the other substantive...

 

As to the first(procedural)...the ONLY thing I must do on form 982 is to check the box of 1a, then fill in the amount of total "phantom Income" of xyz under line 2 and then check the line 3 as "no"?

 

Do you agree? Anything else?

 

As to the substantive....the IRS rules seem to speak to a "calendar year"...the "phantom income" came from foreclosures on my investment properties in the calendar year of 2010, and this tax return is clearly for 2010 and that "phantom income" was "issued" from those foreclosures of 2010....SO: my question just to gild the lily if you will, is to make certain that the fact that the Chapter 7 Bankruptcy was filed and finalized in 2011 is no problem, yes? Or?

 

Thank you in advance for your assistance!

Customer: replied 2 years ago.
I have not received an answer from you or anyone else as to my question above...please respond because it goes to the "heart" of why I came to this site for help
Expert:  cfortunato replied 2 years ago.
Thank you for accepting my answer. However, I will ask that you get a refund for this, as I cannot answer the question on how to fill out the rest of form 982, and did not notice that question when I initially responded to you. This is a question that should be sent to the Tax section.
I will request a refund for you, and you should then ask a new question in the Tax section.
Sorry for the inconvenience!
Customer: replied 2 years ago.

????

 

 

Expert:  cfortunato replied 2 years ago.
Your question should be asked in the Tax section. Your questions are about filling out a tax form, they are not about Bankruptcy Law. Your question is in the Bankruptcy Law section, but should be in the Tax section.

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