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what does insolvent mean?

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    what does insolvent mean?

    if a person and spouse are both working (don't know income but considered middle income), has 1099C for cancellation of debt , how would they qualify for an exception for insolvency on 982? he has retirement plan at work , she has IRA , they own second home.
    maybe i'm thinking that being insolvent means you are poor and can't pay your bills and no assets to sell to pay those bills.
    would you do the worksheet for this couple if they came to you to do their return.? just curious.

    #2
    Originally posted by taxmom34 View Post
    if a person and spouse are both working (don't know income but considered middle income), has 1099C for cancellation of debt , how would they qualify for an exception for insolvency on 982? he has retirement plan at work , she has IRA , they own second home.
    maybe i'm thinking that being insolvent means you are poor and can't pay your bills and no assets to sell to pay those bills.
    would you do the worksheet for this couple if they came to you to do their return.? just curious.

    LIABILITIES EXCEED ASSETS Find the worksheet in your program and give it to your client to fill out.
    This post is for discussion purposes only and should be verified with other sources before actual use.

    Many times I post additional info on the post, Click on "message board" for updated content.

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      #3
      There is also a worksheet in the Pub 4681 if you don't have one in your program. Page 6
      http://www.irs.gov/pub/irs-pdf/p4681.pdf
      JG

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        #4
        Originally posted by taxmom34 View Post
        would you do the worksheet for this couple if they came to you to do their return.? just curious.
        Without some rough numbers, there's no way to tell if it's worth the trouble.

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          #5
          The pennyless begger with no wealth nor any debts would not be considered insolvent. It's probably not a good idea to think of insolvent as poor, because you could be dirt poor and not be insolvent. And you could live in a very nice house and be insolvent. It's all about what you got and what you owe. Worksheet FTW!

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            #6
            i'm so glad they are not my client, she just asking for my advice on filling out the worksheet. told her i never had any experience in this and would not attempt it myself without some instruction. i just entered some of the info i personally knew and the back of my mind i'm thinking "how can they feel they are insolvent?"

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              #7
              Debt

              Some of my clients have far in excess of $1,100,000 in mortgages plus many credit cards maxed out and luxury car loans and parent (college) loans and....

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