maryh wrote:

- quote -

Not really, but confusing the issue anyway. Form 1099-C
instructions tell the lender what cancellation date is to
be, but as a practical matter we're stuck with whatever date
in 2004 they stick on 1099-C.

- quote -

If you're not a homeowner, and credit card debt makes you
clearly insolvent, then submit balance sheet info as at the
forgiveness date in 2004, in any clear format. At minimum,
your assets are likely whatever in checking, the cash you
typically have on you, unpaid wages for the partial pay
period, and the total value of household goods (rough guess
is fine). If your vehicle was three model years old in
2004, then using kbb.com, look up the private-party value of
the same car, but a 2003.

Your liabilities are any loan balance on the car, plus
credit card debt, but not the forgiven debt. Send copies of
just the credit card bills. If your net worth is negative
by any amount, then the $4,000 is not taxable to you.

If your net worth is significantly negative, the accuracy of
the amounts you put down for assets is not that important.
What you're doing is showing IRS that you know how to do a
personal balance sheet, so they can accept it at face value.

Fred F.

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- quote -

My own course of action in such cases is to ask you to seek
the srervices of an independent accountant and have that
accountant prepare a balance sheet for the date of the 1099-C.
To the extent the balance sheet shows you were insolvent, you
will back out that 1099-C income.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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- quote -

Ok - I've talked to the bank that completed the 1099c. They
say that they are required to report this debt cancellation
no matter how old it is, and agreed it is for a truck I took
a loan out for in 1995, but had voluntary given it up one
month later. I also talked to a tax attorney who says i
have to report this amount as income no matter what. He
told me that i could write a letter to irs explaining that
this was for a truck loan which was treated as a repossesion
back in 1995. He told me that the bank who sent the 1099c
to irs is required to report the cancellation of debt to irs
within 3 years so he feels that they did not do this. i am
running out of time. i don't want to owe the irs even more
in interest and penalties. At the end of 2004 I definatly
owed more then I owned if i am allowed to include credit
card debt as my liabilities. Should I just write a letter
and show my income and the value of the one car i had at the
end of 2004, and then show all i owed to credit cards, car
loan, etc to show that I was insolvent?

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"Paul Thomas, CPA" <paulthomascpapc[at]bellsouth.net> wrote:
- quote -

Seeing a consumer protection lawyer couldn't hurt, either.
If the trust was returned due to some defect in the product
or misrepresentation by the dealer, it could be a rescission
of the contract rather than cancellation of indebtedness.

Stu

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"maryh" <glamismary[at]yahoo.com> wrote

- quote -

It's pretty simple, at the time that debt was discharged
(and the timing may be an issue here), were you bankrupt?
That would be - did you owe more than you owned? When debt
exceeds assets, you are bankrupt for all but legal purposes.

Your comments don't point to that as being the fact - "which
I returned due to the terms of the loan and the
misrepresentation by the dealer" doesn't look like
insolvency on your part.

There may be other reasons why that amount is not income to
you, or why any income should be a different amount (even
$0). It may be worth your while to consult with a local CPA
or EA who can get all the pertinent facts of your case and
advise you accordingly.

--
Paul Thomas, CPA
paulthomascpapc[at]bellsouth.net

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PLEASE HELP!! I recently received a letter from IRS claiming
I owe an additional $660 for tax year 2004 because I did not
report as income a cancellation of debt of $4000 which was
reported to IRS. This cancellation of debt turns out to be
for a truck I bought 8 years ago, but which I returned due
to the terms of the loan and the misrepresentation by the
dealer. I lost about $3000 at the time that was paid to
dealer as a down payment. To make a long story short - the
truck was sold by the loan company for about $4000 less then
the balance of the loan. I was hounded by different
collection companies for a couple of years but the calls
stopped at least four or so years ago. Also, I just checked
a copy of my credit report that was generated last December
and there is no mention of owing this bank that reported to
IRS the debt cancellation in 2004.

Am I liable for this tax now? Should I pay someone to
refile my 2004 taxes instead of just paying IRS the
additional $600?? I don't have much savings and I would
have to probably borrow it (charge it to plastic) just to
pay IRS by the end of the month which is what the letter
said I must do. I've read several publications on debt
cancellation and I am very confused about the insolvency
part. Can someone explain this exception in plain english??

Any advice would be very appreciated. Thank you!

Maryh

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