Form 982 & Joint Filers

[redsox2004]

Husband had $30K of credit card debt forgiven in 2010; got a 1099-C for that amount. He files jointly in a non-community-property state. In determining how much of the $30K would be taxable, do we include his wife's assets, or just his own? (He is insolvent, she has assets that she hold alone.)

Joe

[BOB W]

Husband had $30K of credit card debt forgiven in 2010; got a 1099-C for that amount. He files jointly in a non-community-property state. In determining how much of the $30K would be taxable, do we include his wife's assets, or just his own? (He is insolvent, she has assets that she hold alone.)

Joe

He would have to file MFS and claim insolvency. What the effect is on the wife's return has got to be better than including $30,000 on a joint return.

MFS, I guess it is allowed?

[redsox2004]

He would have to file MFS and claim insolvency. What the effect is on the wife's return has got to be better than including $30,000 on a joint return.

MFS, I guess it is allowed?

Yes, he can file as MFS. Returns have not yet been filed so we're in ok shape for that. I haven't looked at the returns yet, but they're moderate-earners and I cannot imagine that they come out ahead by having $30K additional income--even if he has little or no earnings (which I think is the case--he's been out of work for a year) on his returns.

Joe