Client has received Form 1099-C Cancellation of Debt for credit card personal debt. Client has a written agreement from the bank reducing the debt to an amount agreeable to both parties. The agreed upon amount has been paid in full. The bank issued Form 1099-C for the amount of reduction/cancellation. Is there any exception to taxation of the cancelled amount based on a mutual agreement by both parties? All comments appreciated.
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Nope,
All forgiven debt like that is by mutual agreement of the parties. Only insolvency will avoid the tax."A man that holds a cat by the tail learns something he can learn no other way." - Mark Twain -
I think 1099-C does indicate cancellation of debt by mutual agreement. Whether they negotiate or whether there's a lawsuit, at some point there's mutual agreement that the debtor isn't going to pay and the creditor agrees that they aren't going to get their money."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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