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Forgiveness of Student Loan Debt (1099-C) taxable??


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#1 Jack from Ohio

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Posted 30 April 2012 - 04:20 PM

Client is totally disabled as of 2008.

Student loans in the amount of $95K+ forgiven in 2011 due to disability. 1099-C is from U.S. Department of Education.

Question: Is this 1099-C taxable? I can find no regulation that allows exception for debt forgiveness.

If Student Loan is forgiven due to working in appropriate fields for the proper time, the forgiven amount is not taxable and no 1099-C will be issued.

Any ideas?

#2 ILLMAS

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Posted 30 April 2012 - 05:44 PM

Here is more information:


http://www.irs.gov/p.../p970/ch05.html


http://www.irs.gov/p...blink1000244078

http://abcnews.go.co...ory?id=16086241

Hope some of this information is helpful to you.

MAS

#3 Cathy

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Posted 01 May 2012 - 01:06 AM

Jack,

I had one of these...a teacher who taught the number of years required for forgiveness. I had the taxpayer make the call to the number on the letter and the matter was cleared up just by that call. Her refund was not delayed or affected in any manner. It is rather strange that the Dept. Of Education issued 1099-C's in these cases as they are the one that verified the student qualified for the "non-taxable" write off.

Cathy,


OOOOOPPPS......Sorry, Jack....I just skimmed over your post and caught the last paragraph. Anyway....hopefully the fact that the Dept. of Ed. is issuing the 1099-c's to teachers when not necessary will help you.....haven't researched the disability issue myself, but if it's the same as teachers....that explains the 1099-C.

#4 jainen

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Posted 01 May 2012 - 08:22 AM

>>forgiven in 2011 due to disability<<

Do you mean it was forgiven out of sympathy? Disability does not necessarily mean he is insolvent.

#5 Jack from Ohio

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Posted 02 May 2012 - 04:23 PM

Here is the answer.

http://www.finaid.or...forgiveness.pdf

Page 3 middle of the page.

#6 jainen

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Posted 03 May 2012 - 09:45 AM

>>Here is the answer.<<

Thanks for the great research, Jack! This is an example of how a transaction can be completely proper under its own regulations, but still inconsistent with tax regs. Sometimes it's really hard to explain that to the client.




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