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Real Estate & Tax Law_Arizona

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Toones65

Junior Member
HELP!!! I owned farm property in North Dakota (but currently reside in Arizona) with my former spouse. In the Divorce Decree, I was awarded the marital residence, but also incurred the debt associated with it. At the current time, I decided to rent out the property, and as such, have incurred rental income and interest from the renter. The property was later foreclosed on due to lack of payment.
I received a "Cancellation of Debt" (Tax Form 1099-C) from the Mortgage company, reporting approxiamately $128,000 of debt that was cancelled (in box #2). It also states that approx. $23,000 of that amount was interest (in box #3).
My question is whether or not the $128,000 has to be reported as income on my taxes. If not, what schedule for 1040 do I need to use?
 


Snipes5

Senior Member
Yes, it has to be reported. Don't do this one on your own. That is a hefty sum. Go to a tax professional who may be able to get your taxes reduced on it based on an insolvency defense. It's just about your only shot at not having to pay approximately 28% of that as tax, assuming a 28% tax bracket...

Snipes
 

LdiJ

Senior Member
Snipes5 said:
Yes, it has to be reported. Don't do this one on your own. That is a hefty sum. Go to a tax professional who may be able to get your taxes reduced on it based on an insolvency defense. It's just about your only shot at not having to pay approximately 28% of that as tax, assuming a 28% tax bracket...

Snipes
While I agree that the OP needs a tax professional to deal with this, he surrendered an asset, therefore whether or not the 1099C is in whole or in part, taxable income to him depends on whether or not there was a gain.
 

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