Client received 1099-C for cancellation of mortgage debt. Is the amount in box 2 ($14k) includable as income? If so, how is this reported on the tax forms? Thanks.
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If the T/P was in bankruptcy or insolvent on the date the debt was cancelled, it does not have to be included in income. A statement would be attached to the return stating why the cancelled debt was not taxable.
Otherwise, report as ordinary income on line 21.You have the right to remain silent. Anything you say will be misquoted, then used against you.Comment
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Bankruptcy or Insolvency
Determine if t/p filed bankruptcy or was insolvent. Report 1099-C on line 21 as income, then enter 2nd line with reversal. complete and attach form 982.
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