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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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A 1099-c line 5 asks the question was the taxpayer liable.

Customer Question

a 1099-c line 5 asks the question was the taxpayer liable for repayment. The box is checked. Also code g is entered in box 6. On the cancelled debt worksheet the question is " Are you personally liable for repayment of this debt" . My interpretation of this is that means after discharge and is not related to the question on the 1099-c. Am I interpreting this correctly. The exceptions do not qualify in this case. It was a second home with a basis of 136,000 dollars and the 1099-c had a fair market value of 89335 and debt discharged of 43473. Answering the question on the worksheet with a no changes everything. Then of course what do I put on the form 982?
Submitted: 8 months ago.
Category: Tax
Expert:  Lev replied 8 months ago.

Am I interpreting this correctly.

That is NOT correct interpretation...

We are discussing the debt that is cancelled - correct?
If we follow your logic and the question is related to the dent AFTER it cancellation - that question would be ALWAYS angered NO - and the question itself would be not relevant.
We need to follow information on form 1099C box 5 - if that box is checked - that means - you personally is liable.

Expert:  Lev replied 8 months ago.

Then of course what do I put on the form 982?

We need to verify if you are eligible for ANY exclusion ? - that would be the purpose of form 982 - to claim an exclusion.

Expert:  Lev replied 8 months ago.

If you are not eligible - you would simply include the amount of cancelled debt on form 1040 line 21.

However - if you are insolvent - you may qualify for the exclusion - and in this case we need to prepare form 982.

Let me know if that answered your question.

Please be sure to ask for clarification if needed.