[CLBS] Cancellation of debt

[William J. O'Connor]

Patricia:

This is from the IRS’s instructions regarding cancelled debt:  

Bankruptcy Debt canceled in a title 11 bankruptcy case is not included in your income. A title 11 bankruptcy case is a case under title 11 of the United States Code (including all chapters in title 11 such as chapters 7, 11, and 13), but only if the debtor is under the jurisdiction of the court and the cancellation of the debt is granted by the court or occurs as a result of a plan approved by the court. How to report the bankruptcy exclusion. To show that your debt was canceled in a bankruptcy case and is excluded from income, attach Form 982 to your federal income tax return and check the box on line 1a. Lines 1b through 1e do not apply to a cancellation that occurs in a title 11 bankruptcy case. Enter the total amount of debt canceled in your title 11 bankruptcy case on line 2. You must also reduce your tax attributes in Part II of Form 982 as explained under Reduction of Tax Attributes, later.

I hope this helps.

> William J. O'Connor
> O'Connor Law, PLLC
> 355 West Myrtle Street 
> Suite 100
> Boise, ID 83702
> 
> Office:  208-344-5095
> Fax: 208-424-3100





On Jan 28, 2015, at 7:17 PM, Patricia Evans <evans_trish at msn.com> wrote:

> Have I missed something here?  Have a client calling because Potlatch Credit Union sent him the copy of the Cancellation of Debt that they sent to the IRS.  He was a Chapter 7 and received a standard discharge.  Potlatch Credit Union was listed as a creditor.  He is pretty upset and I am hoping he isn't just the first of the calls.  Anything change to allow this to happen?  Thanks, Trish
> 
> Patricia Evans
> Attorney at Law
> POB 1016
> 155 Main Street Suite #2
> Orofino Idaho 83544
> (208) 791-6794 
> 		 	   		  
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