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Dave CPA
Dave CPA, Accountant
Category: Tax
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Experience:  Vast knowledge within the accounting/tax industry
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Client received a 1099c for timeshare box 2 25,000 box 7 25000

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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 4 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
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