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1099C cancellation of debt
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ronald weiner
Feb 9, 2012, 9:20:48 PM2/9/12
to
A party received a total of $32,000 of 1099C cancellation of debt
statements from various credit card companies. All charges were for
items of personal consumption over a period of 3 years.
The party is a senior and had no income but social security during the
3 years. Assets of $3000.
How will the IRS treat the senior who has virtually no chance of
regaining employment and therefore is unable to pay any taxes.
--
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<< 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 >>
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statements from various credit card companies. All charges were for
items of personal consumption over a period of 3 years.
The party is a senior and had no income but social security during the
3 years. Assets of $3000.
How will the IRS treat the senior who has virtually no chance of
regaining employment and therefore is unable to pay any taxes.
--
<< ------------------------------------------------------- >>
<< 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 (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>
Stuart A. Bronstein
Feb 9, 2012, 10:29:20 PM2/9/12
to
ronald weiner <malib...@gmail.com> wrote:
> A party received a total of $32,000 of 1099C cancellation of
> debt statements from various credit card companies. All charges
> were for items of personal consumption over a period of 3 years.
>
> The party is a senior and had no income but social security
> during the 3 years. Assets of $3000.
>
> How will the IRS treat the senior who has virtually no chance of
> regaining employment and therefore is unable to pay any taxes.
You say what his assets are, but not what his debts are. The code
> A party received a total of $32,000 of 1099C cancellation of
> debt statements from various credit card companies. All charges
> were for items of personal consumption over a period of 3 years.
>
> The party is a senior and had no income but social security
> during the 3 years. Assets of $3000.
>
> How will the IRS treat the senior who has virtually no chance of
> regaining employment and therefore is unable to pay any taxes.
says cancellation of debt income does not need to be recognized if
the taxpayer is insolvent at the time. Insolvency means either that
he can't pay bills as they come due, or that his liabilities exceed
assets.
Assuming he has no other debts, the approach that strikes me off the
top of the head is a bit of bootstrapping. It would be to say that
his tax on the cancelled debt exceeds his assets, resulting in his
being insolvent.
I haven't researched this, and don't know if that would work. But
it's worth looking into.
___
Stu
http://DownToEarthLawyer.com
Seth
Feb 10, 2012, 12:24:28 AM2/10/12
to
In article <Xns9FF4C63D1E218s...@130.133.4.11>,
insolvent to me.
Seth
Stuart A. Bronstein <spam...@lexregia.com> wrote:
>ronald weiner <malib...@gmail.com> wrote:
>
>> A party received a total of $32,000 of 1099C cancellation of
>> debt statements from various credit card companies. All charges
>> were for items of personal consumption over a period of 3 years.
>>
>> The party is a senior and had no income but social security
>> during the 3 years. Assets of $3000.
>>
>> How will the IRS treat the senior who has virtually no chance of
>> regaining employment and therefore is unable to pay any taxes.
>
>You say what his assets are, but not what his debts are. The code
>says cancellation of debt income does not need to be recognized if
>the taxpayer is insolvent at the time. Insolvency means either that
>he can't pay bills as they come due, or that his liabilities exceed
>assets.
His debts were $32,000. His assets were $3,000. That seems quite
>ronald weiner <malib...@gmail.com> wrote:
>
>> A party received a total of $32,000 of 1099C cancellation of
>> debt statements from various credit card companies. All charges
>> were for items of personal consumption over a period of 3 years.
>>
>> The party is a senior and had no income but social security
>> during the 3 years. Assets of $3000.
>>
>> How will the IRS treat the senior who has virtually no chance of
>> regaining employment and therefore is unable to pay any taxes.
>
>You say what his assets are, but not what his debts are. The code
>says cancellation of debt income does not need to be recognized if
>the taxpayer is insolvent at the time. Insolvency means either that
>he can't pay bills as they come due, or that his liabilities exceed
>assets.
insolvent to me.
Seth
Alan
Feb 12, 2012, 3:59:36 PM2/12/12
to
On 2/9/2012 8:29 PM, Stuart A. Bronstein wrote:
> You say what his assets are, but not what his debts are. The code
> says cancellation of debt income does not need to be recognized if
> the taxpayer is insolvent at the time. Insolvency means either that
> he can't pay bills as they come due, or that his liabilities exceed
> assets.
>
I've never seen a definition of insolvency for tax purposes that says
> You say what his assets are, but not what his debts are. The code
> says cancellation of debt income does not need to be recognized if
> the taxpayer is insolvent at the time. Insolvency means either that
> he can't pay bills as they come due, or that his liabilities exceed
> assets.
>
the inability to pay bills as they come in meets the test. I am only
aware of liabilities must exceed assets.
Citation?
Mark Bole
Feb 12, 2012, 9:29:40 PM2/12/12
to
On 2012/02/12 12:59, Alan wrote:
> On 2/9/2012 8:29 PM, Stuart A. Bronstein wrote:
>> You say what his assets are, but not what his debts are. The code
>> says cancellation of debt income does not need to be recognized if
>> the taxpayer is insolvent at the time. Insolvency means either that
>> he can't pay bills as they come due, or that his liabilities exceed
>> assets.
>>
> I've never seen a definition of insolvency for tax purposes that says
> the inability to pay bills as they come in meets the test. I am only
> aware of liabilities must exceed assets.
>
> Citation?
>
Cash flow is not a factor in the insolvency calculation for income tax
> On 2/9/2012 8:29 PM, Stuart A. Bronstein wrote:
>> You say what his assets are, but not what his debts are. The code
>> says cancellation of debt income does not need to be recognized if
>> the taxpayer is insolvent at the time. Insolvency means either that
>> he can't pay bills as they come due, or that his liabilities exceed
>> assets.
>>
> I've never seen a definition of insolvency for tax purposes that says
> the inability to pay bills as they come in meets the test. I am only
> aware of liabilities must exceed assets.
>
> Citation?
>
COD purposes.
--
Mark Bole
EA in CA
makbo at pacbell dot net
Stuart A. Bronstein
Feb 12, 2012, 11:02:05 PM2/12/12
to
Mark Bole <ma...@pacbell.net> wrote:
Under §108, "insolvent" means there is an excess of liabilities
over the fair market value of assets. The cancellation of debt
only avoids recognition to the extent that liabilities exceed
assets. For example if someone is net insolvent by $100,000 but he
has cancellation of debt of $150,000, he has to recognize $50,000
of income.
The test of insolvency is based on assets and debts immediately
before the discharge.
___
Stu
http://DownToEarthLawyer.com
> Alan wrote:
>> Stuart A. Bronstein wrote:
>>> You say what his assets are, but not what his debts are. The
>>> code says cancellation of debt income does not need to be
>>> recognized if the taxpayer is insolvent at the time.
>>> Insolvency means either that he can't pay bills as they come
>>> due, or that his liabilities exceed assets.
>>>
>> I've never seen a definition of insolvency for tax purposes
>> that says the inability to pay bills as they come in meets the
>> test. I am only aware of liabilities must exceed assets.
>>
>> Citation?
>
> Cash flow is not a factor in the insolvency calculation for
> income tax COD purposes.
Thanks for the clarification, Mark.
>> Stuart A. Bronstein wrote:
>>> You say what his assets are, but not what his debts are. The
>>> code says cancellation of debt income does not need to be
>>> recognized if the taxpayer is insolvent at the time.
>>> Insolvency means either that he can't pay bills as they come
>>> due, or that his liabilities exceed assets.
>>>
>> I've never seen a definition of insolvency for tax purposes
>> that says the inability to pay bills as they come in meets the
>> test. I am only aware of liabilities must exceed assets.
>>
>> Citation?
>
> Cash flow is not a factor in the insolvency calculation for
> income tax COD purposes.
Under §108, "insolvent" means there is an excess of liabilities
over the fair market value of assets. The cancellation of debt
only avoids recognition to the extent that liabilities exceed
assets. For example if someone is net insolvent by $100,000 but he
has cancellation of debt of $150,000, he has to recognize $50,000
of income.
The test of insolvency is based on assets and debts immediately
before the discharge.
___
Stu
http://DownToEarthLawyer.com
Tom Healy CPA
Feb 13, 2012, 6:55:49 PM2/13/12
to
On Feb 12, 9:02 pm, "Stuart A. Bronstein" <spamt...@lexregia.com>
wrote:
And so, if there are multiple dates at which the credit cards debts
were canceled, you need to calculate the net insolvency just before
each one. It also helps to check how the results compare if each
taxpayer in a couple figures the insolvency separately, or jointly.
wrote:
were canceled, you need to calculate the net insolvency just before
each one. It also helps to check how the results compare if each
taxpayer in a couple figures the insolvency separately, or jointly.
Stuart A. Bronstein
Feb 13, 2012, 8:02:57 PM2/13/12
to
Tom Healy CPA <t...@tomhealycpa.com> wrote:
>> Under õ108, "insolvent" means there is an excess of liabilities
>> over the fair market value of assets. ÿThe cancellation of debt
___
Stu
http://DownToEarthLawyer.com
>> Under õ108, "insolvent" means there is an excess of liabilities
>> over the fair market value of assets. ÿThe cancellation of debt
>> only avoids recognition to the extent that liabilities exceed
>> assets. ÿFor example if someone is net insolvent by $100,000
>> but he has cancellation of debt of $150,000, he has to
>> recognize $50,000 of income.
>>
>> The test of insolvency is based on assets and debts immediately
>> before the discharge.
>
>> recognize $50,000 of income.
>>
>> The test of insolvency is based on assets and debts immediately
>> before the discharge.
>
> And so, if there are multiple dates at which the credit cards
> debts were canceled, you need to calculate the net insolvency
> just before each one. It also helps to check how the results
> compare if each taxpayer in a couple figures the insolvency
> separately, or jointly.
Great information. Thanks.
> debts were canceled, you need to calculate the net insolvency
> just before each one. It also helps to check how the results
> compare if each taxpayer in a couple figures the insolvency
> separately, or jointly.
___
Stu
http://DownToEarthLawyer.com
Arthur Kamlet
Feb 13, 2012, 11:46:45 PM2/13/12
to
In article <Xns9FF7CBC9FD78Es...@130.133.4.11>,
debt being canceled is included in the taxpayer's liabilities!
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
Stuart A. Bronstein <spam...@lexregia.com> wrote:
>Mark Bole <ma...@pacbell.net> wrote:
>> Alan wrote:
>>> Stuart A. Bronstein wrote:
>
>>>> You say what his assets are, but not what his debts are. The
>>>> code says cancellation of debt income does not need to be
>>>> recognized if the taxpayer is insolvent at the time.
>>>> Insolvency means either that he can't pay bills as they come
>>>> due, or that his liabilities exceed assets.
>>>>
>>> I've never seen a definition of insolvency for tax purposes
>>> that says the inability to pay bills as they come in meets the
>>> test. I am only aware of liabilities must exceed assets.
>>>
>>> Citation?
>>
>> Cash flow is not a factor in the insolvency calculation for
>> income tax COD purposes.
>
>Thanks for the clarification, Mark.
>
>Under §108, "insolvent" means there is an excess of liabilities
>over the fair market value of assets. The cancellation of debt
>only avoids recognition to the extent that liabilities exceed
>assets. For example if someone is net insolvent by $100,000 but he
>has cancellation of debt of $150,000, he has to recognize $50,000
>of income.
>
>The test of insolvency is based on assets and debts immediately
>before the discharge.
Yes, immediately before means the day before. Which means the
>> Alan wrote:
>>> Stuart A. Bronstein wrote:
>
>>>> You say what his assets are, but not what his debts are. The
>>>> code says cancellation of debt income does not need to be
>>>> recognized if the taxpayer is insolvent at the time.
>>>> Insolvency means either that he can't pay bills as they come
>>>> due, or that his liabilities exceed assets.
>>>>
>>> I've never seen a definition of insolvency for tax purposes
>>> that says the inability to pay bills as they come in meets the
>>> test. I am only aware of liabilities must exceed assets.
>>>
>>> Citation?
>>
>> Cash flow is not a factor in the insolvency calculation for
>> income tax COD purposes.
>
>Thanks for the clarification, Mark.
>
>Under §108, "insolvent" means there is an excess of liabilities
>over the fair market value of assets. The cancellation of debt
>only avoids recognition to the extent that liabilities exceed
>assets. For example if someone is net insolvent by $100,000 but he
>has cancellation of debt of $150,000, he has to recognize $50,000
>of income.
>
>The test of insolvency is based on assets and debts immediately
>before the discharge.
debt being canceled is included in the taxpayer's liabilities!
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
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