Haven't done one of these in a while. When you have a cancellation of debt of $7000 and you are insolvent, you can only excude the amount by which your liabilities exceed your assets, correct? For example, if your liabilities exceed your assets by $4000, the $3000 is still taxable, as I understand it. Am I correct? Will
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The exclusion is limited to the amount of insolvency and this amount goes to Form 982. -
Don't forget...
Insolvency is figured just before the debt cancellation takes place.Evan Appelman, EAComment
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To the extent
that debt cancellation makes you solvent it is taxable. I hope you are also guaranteed an audit making sure ot that. It is a new world out there. Now we have to get used to it.Comment
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Is This a Personal Residence?
Special rules for personal residence.Comment
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Suggest you review Pub 4681. http://www.irs.gov/pub/irs-pdf/p4681.pdf
There are a number of insolvency examples and a worksheet. Your question is too general for an specific answer.Comment
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