LLC Cancellation Of Debt, OIH

[geekgirldany]

I have two questions.

Client has an LLC, sole member, schedule C reporting. Credit card was in LLC name and the business is no longer operating. Client/LLC got a cancellation of debt on the credit card. I want to double check that this COD is reported on Schedule C. Is this correct?

Second question, a client lives with another person. Has an office in the home and is paying all the utilities. Well really all the bills. The bills are in the other person's name. Can my client deduct OIH (utilities only) even though the bills are not in his name?

Thank you for any help,
Dany

[Gary2]

I'm starting to think that for 90% of the questions about single member LLCs, the answer is "pretend the LLC doesn't exist." In this case, the name on the credit card isn't nearly as important as what the debt was for. If the client was good about only using the credit card for business expenses, then yes, it's a schedule C item. Presumably the expense has already been deducted, so it's taxable unless one of the exclusions applies.

[geekgirldany]

Thanks Gary. Well he said that it was used for personal and business. Neither the LLC or the client is insolvent or claimed bankruptcy. The credit card company settled for a certain amount and wrote off the rest.

[Burke]

In that case, you & the TP will have to allocate the debt appropriately to personal and business use to determine what needs to go on the Sche C (subj to SE tax) and what goes on Line 21. Good luck.

[Burke]

Second question, a client lives with another person. Has an office in the home and is paying all the utilities. Well really all the bills. The bills are in the other person's name. Can my client deduct OIH (utilities only) even though the bills are not in his name?
Dany

I would attribute any household expenses this person is paying as rent and put it on that line on the 8829.