How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Dave CPA Your Own Question
Dave CPA
Dave CPA, Accountant
Category: Tax
Satisfied Customers: 840
Experience:  Vast knowledge within the accounting/tax industry
Type Your Tax Question Here...
Dave CPA is online now
A new question is answered every 9 seconds

Client received a 1099c for timeshare box 2 25,000 box 7 25000

This answer was rated:

Client received a 1099c for timeshare box 2 25,000 box 7 25000 does that mean no taxable cancellation of debt

Welcome to Just Answer,

Unfortunately there is taxable income in the amount of box 2 $25,000. Because the Fair Market Value box 7 is the same of the cancellation, doesn't mean it isn't taxable. I hate to give you the bad news.

The good news is that there are certain times when you can exclude this from your income.

Canceled Debt that Qualifies for EXCEPTION to Inclusion in Gross Income:
- Amounts specifically excluded from income by law such as gifts or bequests
- Cancellation of certain qualified student loans
- Canceled debt, that if paid by a cash basis taxpayer, would be deductible
- A qualified purchase price reduction given by a seller
- Any Pay-for-Performance Success Payments that reduce the principal balance of your home mortgage under the Home Affordable Modification Program

Canceled Debt that Qualifies for EXCLUSION from Gross Income:
- Debt canceled in a Title 11 bankruptcy case
- Debt canceled during insolvency
- Cancellation of qualified farm indebtedness
- Cancellation of qualified real property business indebtedness
- Cancellation of qualified principal residence indebtedness

I have provided more information in the link below.

Let me know if you have any questions before you rate my answer. A positive rating is what I strive for. Regards Dave
Customer: replied 3 years ago.

So if box 7 was 50,000 would have no bearing on the outcome



No it would not. The basis of the cancellation is how much you owe and not how much it is worth. You owed a third party $25,000 because you didn't pay that back, that is now considered income to you. Regards Dave
Dave CPA and 3 other Tax Specialists are ready to help you