Proof Of Insolvency

[Booger]

I'm responding to an IRS Notice for a client who had debt cancelled in 2008. Form 982 was attached to the 2008 Form 1040.

Is there a specific "format" for the balance sheet that the IRS wants to see to prove insolvency? I was just going to prepare

a balance sheet and, with a cover letter, (along with a copy of the IRS Notice) send the response back to the IRS.

[jainen]

>>Is there a specific "format" for the balance sheet that the IRS wants to see to prove insolvency?<<

According to the instructions to the form you say was used, "For details and a worksheet to help calculate insolvency, see Pub. 4681."

[Booger]

>>Is there a specific "format" for the balance sheet that the IRS wants to see to prove insolvency?<<

According to the instructions to the form you say was used, "For details and a worksheet to help calculate insolvency, see Pub. 4681."

Thanks, jainen. Couldn't sleep, so I thought I'd get some work done.

[jainen]

>>get some work done<<

Please let us know if IRS is satisfied with the worksheet, or wants specific proof like bank statements and appraisals. Hmmm, for that matter, let us know if YOU are satisfied with the client's unsupported numbers!

[Gail in Virginia]

I had one a couple of years ago, and when the IRS requested more information about the insolvency, I listed the assets (cash, bank account, trailer, cars, etc.) and the liabilities (mostly various credit cards) and never had any problem.

[Booger]

>>get some work done<<

Please let us know if IRS is satisfied with the worksheet, or wants specific proof like bank statements and appraisals. Hmmm, for that matter, let us know if YOU are satisfied with the client's unsupported numbers!

Where did you get the "idea" that the client's numbers were unsupported?

Quite a jump, don't you think?

[jainen]

>>Where did you get the "idea" that the client's numbers were unsupported?<<

I got that idea from your statement, "I was just going to prepare a balance sheet." From that I jumped to the idea that the tax return had already been filed before the balance sheet was prepared. In my practice, "supported" and "documented" have similar meanings.

[Booger]

>>Where did you get the "idea" that the client's numbers were unsupported?<<

I got that idea from your statement, "I was just going to prepare a balance sheet." From that I jumped to the idea that the tax return had already been filed before the balance sheet was prepared. In my practice, "supported" and "documented" have similar meanings.

I did have the assets & liabilities of the client documented/supported when the return was filed. All I was asking in my original post was whether the IRS had a specific type of balance sheet FORMAT required.

[BulldogTom]

There is a worksheet in the publication. I helped a client prepare one of these earlier this year in anticipation of a letter from the IRS. They ended up with a stack of documents about 1 1/2 inches thick. All bank statements, retirement account statements, appraisals on home, list of cars, loan docs. Basically everything. If the IRS comes calling, they are ready.

Tom

Lodi, CA