Cancellation of Debt-1099-C

[Bird Legs]

Client received 1099-C for 2005. This was for repossession of personal vehicle
in 2005, in the amount of $15,000. During this time client was going through
bankruptcy.
By filing bankruptcy, would this cancellation of debt be non-taxable?
If so, what would need to be attached to the tax return to report it?
A copy of the bankruptcy papers? A form showing insolvency?
Your help is appreciated.

[Jan]

You could use form 982

[Jesse]

The cancellation of debt would be non-taxable if this debt was discharged in the bankruptcy. Also may be non-taxable if taxpayer is insolvent at time of debt cancellation.

I think Form 982 should be filed with the original return.

[taxmandan]

Cancellation of debt

If the debt was included in the bankruptcy then it is non-taxable and the 1099-C was issued in error, I've seen that happen. In that case, I've listed the amount on line 21 and then backed it out on line 21 also, description as 'discharged in bk'. The Form 982 would only be used to show insolvency at the time of the debt forgiveness, and not needed if the debt was in the bk. TheIRS might ask later for proof of the bk discharge, so keep copies of the discharge papers.

Daniel