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Hi and welcome to Just Answer!1. Can BOA write off and cancel debt this old and just mow notify me?As long as the debt is valid and you are personally responsible for that debt - that is up to the creditor to pursue collection effort or to forgive the debt. If they choose to forgive the loan - they are required to issue the form 1099C. 2. Can I then use form 982 and discharge this 1099-C under part 1, D "Discharge of qualified real property business indebtedness. To do that - you need to verify the qualification of your debt.According to instructions - http://www.irs.gov/pub/irs-pdf/f982.pdf - Qualified real property business indebtedness is indebtedness (other than qualified farm indebtedness) that (a) is incurred or assumed in connection with real property used in a trade or business, (b) is secured by that real property, and (c) with respect to which you have made an election under this provision.
As the loan was secured by your personal not business property - that option may not be used.3. Business was financed by increase of our home loan in 2007 to over it's market value in 2012 values. Coincidentally by Countrywide, now BOA. So does Part 1, section e also qualify.See instructions - Any debt secured by your main home that you use to refinance qualified principal residence indebtedness is treated as qualified principal residence indebtedness, but only up to the amount of the old mortgage principal just before the refinancing. Any additional debt you incurred to substantially improve your main home is also treated as qualified principal residence indebtedness.
So far - if the loan was not used for improvements of your primary residence - that option may not be used. 4. If so on these issues what do I need do to document or is that necessary?Unfortunately - your only option - to use (b) Discharge of indebtedness to the extent insolvent - please verify if you qualify.
We had an original SBA loan for this at a higher rate, with house on equipment purchased from proceeds as part to collateralize for that loan. Refied the house to pay off the SBA...as well we incorporated in 2007. We were insolvent at the time payments were stopped on this debt used to run the business. The debt and credit card was addressed to our company as well as to me personally. Any help to point in the right direction here is appreciated.
To use insolvency exception - it should be determined on the day before the debt was forgiven. That date will be reported on your 1099C.
For your own record - you need to keep an insolvency worksheet - the form may be found in IRS publication 4681, page 6 - http://www.irs.gov/pub/irs-pdf/p4681.pdf
When you determine your insolvency - you need to count your assets and debts BEFORE the debt is canceled. The date when the debt is canceled will be on form 1099C box 1 - http://www.irs.gov/pub/irs-pdf/f1099c.pdf .