Jack from Ohio Posted March 2, 2013 Report Share Posted March 2, 2013 Widowed client (2009) with student loan with a remaining balance of $22K. Been paying on the loan since 2005 and paid on time. Was awarded SS disability in Jan 2011 and is literally unable to work. Student loan forgiven Jan 2012 and 1099-C issued. Client has been insolvent since back surgeries etc. in mid 2010 did not allow her to work. Can I use insolvency as reason for the 1099-C to not be taxable income? Is there a special rule because it was a Student Loan that was forgiven? Quote Link to comment Share on other sites More sharing options...
Jerry W Posted March 2, 2013 Report Share Posted March 2, 2013 I'm not certain about the use of insolvency. If she is permanently and totally disabled, she may have to Request a Total and Permanent Disability Discharge. If you Google the term, you can download the application in Pdf format. Might be worth looking into. JerryW Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted March 2, 2013 Author Report Share Posted March 2, 2013 I'm not certain about the use of insolvency. If she is permanently and totally disabled, she may have to Request a Total and Permanent Disability Discharge. If you Google the term, you can download the application in Pdf format. Might be worth looking into. JerryW The loan was discharged on 1-27-12. She received 1099-C for the discharge. She was definitely insolvent then. My question is about any special caveat for student loans and using insolvency so the forgiveness is not taxed. Quote Link to comment Share on other sites More sharing options...
Pacun Posted March 2, 2013 Report Share Posted March 2, 2013 Just file form 982. I don't see any difference between that debt or a credit card debt. If tax payers were and are insolvent at the time of filing, you can use insolvency. Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted March 2, 2013 Report Share Posted March 2, 2013 Yes, it qualifies. Quote Link to comment Share on other sites More sharing options...
rfassett Posted March 2, 2013 Report Share Posted March 2, 2013 No known exception for student loans. Granted, most are not discharged in bankruptcy (making them have a different character than other unsecured debt), but once they are cancelled, for whatever reason, they are treated like anyother cancelled debt. Quote Link to comment Share on other sites More sharing options...
Gail in Virginia Posted March 2, 2013 Report Share Posted March 2, 2013 And now that we can easily attach PDF files to e-files, I would attach a statement showing her insolvency immediately before the cancellation of debt. It couldn't hurt, and you should have it prepared in your files anyway. Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.