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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28081
Experience:  Taxes, Immigration, Labor Relations
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My car was parked because I did not make it to the insurance

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My car was parked because I did not make it to the insurance office to reinstate my auto insurance, but it was stolen and involved in an accident which totaled the car. The police caught the gentleman, but the finance company sent me a 1099-C Form for the forgiveness of debt and now the IRS is telling me I owe approximately $3,500 in taxes based on this forgiveness of debt. Can you give me any advise on this. I do not have $3,500.00 and If I knew that the Finance company was not going to prosecute the guy the police caught I would have begged the courts for finacial help.
Submitted: 7 years ago.
Category: Tax
Expert:  Lev replied 7 years ago.
As you took the loan to purchase the car and that loan was forgiven - the amount of debt forgiven reportable on 1099-C - - generally is taxable, unless an insolvency exemption apply -- you should file a form 982 - to proof your insolvency - and might exclude all or part of canceled debt from taxable income.

Please see the IRS Publication 908 Bankruptcy Tax Guide - - with example of the form 982 on the last page.


If you are not insolvent - you may not exclude forgiven amount from your taxable income.



If additional - you may report the casualty and theft loss on your tax return. Generally - you need to identify the fair market value of the property before it was damaged and the fair market value of the property after it was damaged. It the property was a total loss - that value would be zero.

The difference would be your casualty loss.


You may find more details and reporting examples in the IRS publication 547 -

Let me know if any clarification is needed.


Lev and 2 other Tax Specialists are ready to help you
Customer: replied 7 years ago.
Do I still have a case (July 1998) Against the nan who stole the car?
Expert:  Lev replied 7 years ago.

I believe that the statute of limitation has been expired (it is usually three years).

But you may consult with the attorney in your area - you may use Massachusetts Bar Lawyer Referral Service - to locate an attorney.

Most attorneys will provide first free consultation - just ask.

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