[CLBS] moratorium on taxing debt forgiveness

[Sarah Bratton]

To add to what Marty has said 

https://www.irs.gov/taxtopics/tc431.html


Amounts that meet the requirements for any of the following exceptions are not cancellation of debt income. 
EXCEPTIONS to Cancellation of Debt Income:
 
1.Amounts canceled as gifts, bequests, devises, or inheritances
2.Certain qualified student loans canceled under the loan provisions that the loans would be canceled if you work for a certain period of time in certain professions for a broad class of employers 
3.Amounts of canceled debt that would be deductible if you, as a cash basis taxpayer, paid it 
4.A qualified purchase price reduction given by the seller of property to the buyer 
5.Any Pay-for-Performance Success Payments that reduce the principal balance of your home mortgage under the Home Affordable Modification Program 


Amounts that meet the requirements for any of the following exclusions are not included in income, even though they are cancellation of debt income. 
EXCLUSIONS from Gross Income:
 
1.Debt canceled in a Title 11 bankruptcy case
2.Debt canceled during insolvency
3.Cancellation of qualified farm indebtedness
4.Cancellation of qualified real property business indebtedness
5.Cancellation of qualified principal residence indebtedness




Sarah B. Bratton, Attorney
Martelle, Bratton and Associates
sarah at martellelaw.com
873 E. State St.
Eagle, ID 83616
phone (208)938-8500
fax (208)938-8503


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-----Original Message-----
From: CLBS [mailto:clbs-bounces at admws.idaho.gov] On Behalf Of Marty Martelle
Sent: Tuesday, March 22, 2016 11:00 AM
To: cldlaw at gmail.com; CLBS at admws.idaho.gov
Subject: Re: [CLBS] moratorium on taxing debt forgiveness

https://turbotax.intuit.com/tax-tools/tax-tips/Home-Ownership/How-to-Avoid-Taxes-on-Canceled-Mortgage-Debt/INF12033.html

This is a  link to the Turbo Tax Site.  They show that the Relief Act has been extended.  Take it for what it is worth.  I have seen other articles that it has been extended into 2016, also,  but, we haven't had one this year.

Also, there is another way to remove 1099 -C  income, administratively through the IRS.  If the person was insolvent at the time of the forclosure or other forgiveness, they can file for relief with the IRS.  It is considerably more difficult this way, but we have done it on a number of occasions.  

Marty

Martin J. Martelle, Attorney
Martelle, Bratton and Associates
A BBB "A+" Rated Law Firm
Tel: 208-938-8500
Fax: 208-938-8503
www.martellelaw.com



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-----Original Message-----
From: CLBS [mailto:clbs-bounces at admws.idaho.gov] On Behalf Of Catherine Dullea
Sent: Tuesday, March 22, 2016 10:52 AM
To: CLBS at admws.idaho.gov
Subject: [CLBS] moratorium on taxing debt forgiveness

Does anyone know if there is still any kind of moratorium with the IRS on taxing debt forgiveness as income?  I was under the impression it went the way of the dodo bird, but potential chapter 7 clients insist it still exists.

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