Forgiven Debt

[ernieh]

New client received letter for forgiven debt from prior year. Debt was forgiven due to bankruptcy. Am I correct in using form 982 to show forgiven debt. By showing it on form 982 does it need to be shown on form 1040 as income and then credited back off. My research thus far has me believing the 982 explanation is all that is required. Thanks for any replies. Ernie

[taxmandan]

You say a letter was received

Did they receive a 1099-C or just a letter?

[ernieh]

letter from IRS

Client divorced, bankruptcy, relocated. States he never received 1099-c
Letter is notice from IRS showing that they did receive it.

[taxmandan]

Then you need to see the BK paperwork to determine if the debt was, in fact, discharged in the BK, or if it had been forgiven PRIOR to the BK in which case it is reportable. If it was in the BK, then no 1099-C should have been issued. Check the paperwork, don't rely on the client's memory of facts.

[ernieh]

thanks for replies

thanks dan, I'll push the client to get me the paperwork. To original question, if BK paperwork shows debt excused, is the 982 all thats required.