TaxmannEA Posted March 27, 2010 Report Share Posted March 27, 2010 A client just presented me with a 1099C showing around $18K of cancelled debt. This was a loan that was discharged in a Chapter 7 bankruptcy. The date of cancellation is shown as 0/00/0000 and the bankruptcy box is not checked. I'm trying to show this as non-taxable, but I seem to be too fried to get it thought out. Any ideas? Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted March 28, 2010 Report Share Posted March 28, 2010 The question is, was/is your client insolvent? I handled one of these a few years back. It would be in your client's best interest to obtain all of the bankruptcy documents from the court. That will show the discharge of this debt even though the box isn't checked on the 1099C. IF it is included in the documents, then file it as non-taxable based on the bankruptcy filing. Your client might get a notice and have to produce proof. My client got a notice plus a proposed adjustment to his tax liability of that year. We presented the court docs and it was resolved and to my surprise, it was done very timely by the IRS Quote Link to comment Share on other sites More sharing options...
TaxmannEA Posted March 28, 2010 Author Report Share Posted March 28, 2010 Thanks Terry. The client is dropping off the documents. I guess that I just get frustrared by banks, ets. who don't seem to know or care about processing these forms in a correct manner. Quote Link to comment Share on other sites More sharing options...
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