On Feb 17, 8:26*pm, Mark Bole <ma...[at]pacbell.net> wrote:
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Thanks Mark.

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JohnS wrote:
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My condolences.


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To the extent of your insolvency. It's not a binary condition.

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You should have records and a worksheet to back up your insolvency
calculation, although they do not need to be filed with your return. In
a quick Internet search, I found one simple example (Legal Services of
Northern Virginia):

http://www.lsnv.org/Debt_Cancellation_Vignette.doc

but more thorough worksheets should be available wherever EA's and CPA's
work, in companies both large and small.

-Mark Bole

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

- quote -

credit card companies. I was able to make a settlement with one last
year and got a 1099C form from them for $1000 (rounding it off for
simplicity.)

I understand that if I had been solvent that this would qualify as
income. But since I'm insolvent, as far as I understand, it's
excluded from income.

On form 982 I've checked the:
1b "Discharge of indebtedness to the extent insolvent (not in a title
11 case)"
and on line 2:
"Total of discharged indebtedness excluded from gross income", I put
in the $1000.

Either I'm dense or the instructions aren't that clear, but I'm
assume this means I leave the $1000 off as reported income on the 1040
Form and that Form 982 is essentially an explanation of why I left it
off. (I don't see any connection between the two forms.)

Or is that just an open invitation for an IRS audit?

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >