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Marvin,EA
Marvin,EA, Enrolled Agent
Category: Tax
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Experience:  Enrolled to Represent Taxpayers Before The IRS
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How to prove insolvency to IRS with debt cancellation.

Customer Question

How to prove insolvency to IRS with debt cancellation.
Submitted: 8 years ago.
Category: Tax
Expert:  Marvin,EA replied 8 years ago.

Hello and thank you for using Just Answer. You should have records of all liabilities (credit cards, loans, other debts). Records of total assets (cash in bank, stocks, bonds, assets not paid in full, other assets). In order to discharge 1099-C debt you must be insolvent to the extent that your liabilities exceeded the fair market value of your assets (assets that are paid for in full) immediately before the discharge. You can read Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness,(www.irs.gov/pub/irs-pdf/f928.pdf)

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Expert:  Marvin,EA replied 8 years ago.
Incorrect address (www.irs.gov/pub/irs-pdf/f982.pdf)

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