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 Megan C Your Own Question
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16576
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Type Your Tax Question Here...
Megan C is online now
A new question is answered every 9 seconds

The issue is whether or not to file federal taxes jointly or

This answer was rated:

The issue is whether or not to file federal taxes jointly or separately. My wife has cancelled debt of $160,000. She can show insolvency if we file separately, but If we file jointly and I must include my 401K assets on the insolvency worksheet she cannot show insolvency. If we file jointly, must we show joint insolvency? Can we show only her assets and liabilities on the worksheet?

We will lose tax credits if we must file separately.
Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

According to PLR(NNN) NNN-NNNN--- "the determination of a taxpayer's entitlement to the insolvency exclusion under section 108(a)(1)(B) is based on all the assets reachable by the individual taxpayer's creditors. The filing of a joint return, pursuant to section 6013(b) of the Code, does not affect whether a spouse's separate assets will be used to determine the insolvency of the taxpayer."

So, she can still file the 982 by herself with her own assets, so if she is personally insolvent she would be able to exclude the cancellation of debt income from her income. However, her interest in joint assets would be counted as her assets, as would her interest in joint liabilities.

No need to file a separate return.

Please let me know if you need anything additional. Thanks again for using and have a great day.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site. This answer is not to be construed as financial or legal advice. Please contact a local tax professional, and do not rely on this assessment to avoid penalties or to make financial decisions. This is for informational purposes only**

You should be aware that your question, as with most tax questions, can never really be answered completely...addressing all the permutations; that is because of the many assumptions that have to be made I have done my best to determine what I think you are asking and answering it in the most direct and understandable manner possible. If, however, after reviewing the questions, you have any uncertainties or further questions, please do not hesitate to ask.

Megan C and 2 other Tax Specialists are ready to help you
Thank you for the positive rating. Please come back and see me next time you have a question. It was a pleasure working with you today. Have a great afternoon.
Thank you for the positive rating. I really enjoyed working with you – please feel free to request me again when you come back to ask another question. Simply enter "MyVirtualCPA" in the subject of your question, and it will be routed directly to me. Thank you again for using JustAnswer. For the quickest service, please post a new question.