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About 15 years ago I bought a mobile home in South Carolina.

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The land that the home...
About 15 years ago I bought a mobile home in South Carolina. The land that the home was on was sold and the new owners told me I had to leave. I could not afford to move the home and wrote to the mortgage company and told them the situation and that I would have to turn the mobile home back to them. About 12 years ago I moved to New Hampshire. I just received notice that the debt was forgiven but I would have to declare $26,000± as income on my taxes. This will certainly mess me up. Do I have to do this?
Submitted: 1 year ago.Category: Tax
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Answered in 6 minutes by:
3/16/2016
Tax Professional: Robin D., Senior Tax Advisor 4 replied 1 year ago
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,867
Experience: 15years with H & R Block. Divisional leader, Instructor
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Hello

Forgive debt is income in the year forgiven.

Generally, if you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt. There are several exceptions to the taxability of cancelled debt, such as insolvency or bankruptcy.

When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is reportable as income because you no longer have an obligation to repay the lender.

If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you.You are insolvent when your total debts are more than the fair market value of your total assets.Insolvency can be fairly complex to determine and the assistance of a tax professional is recommended if you believe you qualify for this exception.

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