Ask Experts Questions for FREE Help !
Ask
    azula18's Avatar
    azula18 Posts: 33, Reputation: 1
    Junior Member
     
    #1

    Feb 11, 2013, 07:53 PM
    Why is my debt cancellation on 1099-C considered income when I have nothing to show?
    I have filed my taxes for 2012, and I just received a 1099-C for a debt from GMAC that was cancelled last year. This was from a vehicle that was repossessed in 2010. The original payoff was $5410 (the difference between the loan I financed and the amount the vehicle was auctioned for), of which $3246 was cancelled after I paid the difference to GMAC ($2164).

    My question is this: How is this considered income when I never actually had any of that money and I do not own the property? This is not like a credit card pay-off, where the money has already been spent!!

    I am expected to include this in my Gross Income for the year? It seems like I am being double-taxed here.

    PLEASE HELP!
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,815, Reputation: 846
    Senior Tax Expert
     
    #2

    Feb 11, 2013, 08:16 PM
    It is IMPUTED INCOME, because it was a debit you were legally liable for and would eventually have paid, but for which your debt was forgiven. If you do not have to pay a bill, that is money in your pocket in the eyes of the IRS.
    MukatA's Avatar
    MukatA Posts: 7,110, Reputation: 176
    Tax Expert
     
    #3

    Feb 13, 2013, 12:01 AM
    From IRS Tax Topic 140:
    When you borrow money, you are not required to include the loan proceeds in gross income because you have an obligation to repay the lender later. If that obligation is subsequently canceled, you may be required to include the amount of the canceled debt in gross income. A commercial lender canceling a debt will issue a Form 1099-C , Cancellation of Debt, to report the cancellation.
    Check if box in 5 is checked or not. If not, then this is not an income.
    azula18's Avatar
    azula18 Posts: 33, Reputation: 1
    Junior Member
     
    #4

    Feb 23, 2013, 06:56 PM
    I am insolvent. My liabilities far outweigh my assets. Yay

Not your question? Ask your question View similar questions

 

Question Tools Search this Question
Search this Question:

Advanced Search

Add your answer here.


Check out some similar questions!

1099 C debt cancellation [ 0 Answers ]

Do I have to pay taxes on a cancelled debt?

1099 c cancellation of debt. With a twist! [ 6 Answers ]

Back in 2007 my wife and I separated temporarily. During that time my wife purchased a home with a friend as the co-borrower. Several months later my wife and I reconciled and she moved back in. The friend agreed to stay in the house and continue with the mortgage on the new house. ...

Can I show the expenses on 1099-misc income [ 1 Answers ]

I got $1100 as 1099-misc income, can I show some expenses to reduce my tax

Where to show 1099-MISC SPORADIC Income Box 7 [ 3 Answers ]

I have a 1099-MISC with income ($824) in box 7. 1040 Line 21 says NOT HERE. Schedule C says NOT HERE because it's sporadic. 1040 instructions page 11 say CHECK INSTRUCTIONS ON FORM 1099-MISC. Since it's sporadic (i.e. a one-time event) I don't owe SE tax on it. It also includes...


View more questions Search