Have Tax Questions? Ask a Tax Expert for Answers ASAP
It seems like most of the tax liability is due to the cancellation of debt income.
If the balance loan is canceled by the lender(NOrmally you get a Form 1099C for that) than to the extent you are insolvent you will not report the canceled debt as income.
To determine insolvency you need to prepare a personal financial statement as of the day before the debt was discharged. A personal financial statement would show all assets at their then fair market value and all outstanding liabilities. If the liabilities exceed the value of the assets, then you may defer recognition to the extent of the excess of the liabilities over the assets.
Section 108(a)(1)(B) provides that, "Gross income does not include any amount which (but for this subsection) would be includible in gross income by reason of the discharge (in whole or in part) of indebtedness of the taxpayer if ... the discharge occurs when the taxpayer is insolvent." Section 108(d)(3) further provides that, "The term ‘insolvent' means the excess of liabilities over the fair market value of assets. With respect to any discharge, whether or not the taxpayer is insolvent, and the amount by which the taxpayer is insolvent, shall be determined on the basis of the taxpayer's assets and liabilities immediately before the discharge."
Let me know if you have any question.
Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.
Is the Discharge date the day I paid Bank of america the final $5,000.00 and received
a settlement statement, Would this be true for any other balances owed, etc credit
cards or carloan?
Discharge is the day the debt was canceled. It could be the day you paid the final amount if you paid in full settlement.
Yes, it is true for other loan balances too if they were forgiven.
I did not have any other balances forgiven, however, between my car loan and my three
credit cards payments are up to date. Between these I owe $18,400.00.Do I need to have statements for these balances as of the discharge date? (last June) Or what the balances
are at the present time Bill
You need to list the assets and liabilities as of the date of the cancellation of the debt. So you will list the liabilities as of that date. Hence, the loan balances as of that date should be considered.
To: XXXXX XXXXX were very helpful and appreciate all the information. However I noticed
a charge from you company for $95.00 on my Visa Card. I signed up for $30.00 and added a tip for $5.00. Can you explain this
Every time you accept an answer you are charged for the same. It seems that you have accepted two times and hence you have been charged twice.
However- the charge should be $60 in that case and not $95.
I would suggest you send an email to firstname.lastname@example.org
I will also notify them.
RD I understood that I could ask questions until I was satisfied. If I Hit Accept answer
2 times it was in error. .
I will notify the bank not to process the card if you will not accept the agreeded amount
Of thirty dollars plus the tip.
Please answer asap.