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For cancelled debt you should receive a form 1099-C - http://www.irs.gov/pub/irs-pdf/f1099c.pdf - You should look at the box 2 - that amount is considered your income and in general is taxable.
However there are some exemptions. If you were insolvent at the time of cancellation - you need to file a form 982 - to proof your insolvency - and may not include all or part of canceled dent into taxable income.
Here is the form - http://www.irs.gov/pub/irs-pdf/f982.pdf
You are insolvent when your total debts exceed the total fair market value of all of your assets. Assets include everything you own, e.g., your car, house, condominium, furniture, life insurance policies, stocks, other investments, or your pension and other retirement accounts. You were insolvent to the extent that your liabilities exceeded the fair market value of your assets immediately before the cancellation.
If the amount is taxable do I declare half because it's a joint debt?
Was it reported using your name and your SSN?
As I said in my question it was a joint debt.
You wrote - "I received a 1099C" - I need to know how it was reported to the IRS - was only your SSN on the form 1099-C?
No both names are XXXXX XXXXX form.
was only your SSN on the form 1099-C or two SSNs?
let me verify...
Please see this document - http://www.irs.gov/pub/irs-wd/0023001.pdf
Both co-obligors, husband and wife, received income in the total amount of the debt discharged. However, a determination should be made as to the appropriate amount of discharged debt allocable to each taxpayer that is jointly and severally liable, taking into account all the facts and circumstances.
Rather, an appropriate allocation of the discharged indebtedness should be made between the co-obligors, based on all the facts and circumstances.
So the IRS doesn’t provide that taxable canceled debt is divided equally – but allows dividing in any proportion based on all the facts and circumstances.
Generally – you need to negotiate with your husband which part is claimed by each of you and add a note to your tax return providing your reasoning if the amount you claim is less than the full amount.