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We just reiced a 1099c cancellation of debt 2nd mortgage for…

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we just reiced a 1099c...
we just reiced a 1099c cancellation of debt for our 2nd mortgage for $135 k, which we stopped paying years ago, because we weren't able to pay both loans on our primary home. We refinanced the first loan a couple of times and are able to keep our home. We did not file bankruptcy. do we have to record this as income when we file our taxes or what can we do? thank you. Rita
Submitted: 2 years ago.Category: Tax
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2/14/2016
Tax Professional: emc011075, Tax adviser replied 2 years ago
emc011075
emc011075, Tax adviser
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Satisfied Customers: 3,697
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Hi. My name is ***** ***** I will be happy to help you.

Mortgage forgiveness debt relieve that allowed to exclude 1099C for the principle residence from your income expired at the end of 2014 and unfortunately wasn't extended. So, under current tax law the canceled debt is treated as taxable income unless you can claim insolvency. Insolvency means that your total assets (everything you own - house, cars, investment, retirement accounts) is less than your total debts (mortgage, credit cards, medical bills, student loans) immediately before your debt was canceled. The cancellation day is listed on 1099C.

For instance, if the debt was canceled on April 1, 2015, you will need to collect information about your assets and liabilities (debts) on or about March 31, 2015.

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Tax Professional: emc011075, Tax adviser replied 2 years ago

Hi, Rita, just checking in if you need more help. And if this answered your question, please take a moment to rate my response so that I may receive credit for assisting you today. You find the rating bar on the top of the page – 5 stars. However, if you need clarification, or want to discuss this issue further, let me know. Thank you.

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