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RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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I filed my taxes and claimed a 10, 000 debt cancellation income

Resolved Question:

I filed my taxes and claimed a 10, 000 debt cancellation income for a debt settlement in March, but had to file for bankruptcy in Sept. Can i file an ammended tax return and not claim the income because I was not solvent.
Submitted: 6 years ago.
Category: Tax
Expert:  RD replied 6 years ago.
Were you insolvent when the debt was cancelled?

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.

But if the above does not apply than you cannot claim the insolvency exclusion.

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Customer: replied 6 years ago.
?The day before I settled the bank of Amrc credit card debt or the bankruptcy?
Expert:  RD replied 6 years ago.
The day before the debt was canceled (meaning settled by BOA)

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