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Insolvent on a joint return?

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enthusiaction

Junior Member
What is the name of your state (only U.S. law)? Washington

I received a 1099-C for a cancelled debt. I understand I might be able to avoid paying tax on the amount if I am considered insolvent. My debts are easily triple my assets on the date of the cancellation, but my wife and I file a joint return and her assets far exceed my debt.

Can I still use the insolvent defense, since my debts are triple my assests, or will her assets have to be included on form 982? It would effectively kill my chances of avoiding taxes on the cancelled debt if her assets have to be included.

What's the best course of action here? Thanks!
 


LdiJ

Senior Member
What is the name of your state (only U.S. law)? Washington

I received a 1099-C for a cancelled debt. I understand I might be able to avoid paying tax on the amount if I am considered insolvent. My debts are easily triple my assets on the date of the cancellation, but my wife and I file a joint return and her assets far exceed my debt.

Can I still use the insolvent defense, since my debts are triple my assests, or will her assets have to be included on form 982? It would effectively kill my chances of avoiding taxes on the cancelled debt if her assets have to be included.

What's the best course of action here? Thanks!
You would have to be insolvent as a couple, if you want to claim insolvency to exclude the 1099C income.

How much 1099C income are we talking about?
 

LdiJ

Senior Member
About $3300
For an amount that small (I know it probably doesn't seem small to you) the tax bite isn't going to be dramatic. It would probably cost you more as a couple, to file separately than you would save in being able to exclude that income.
 

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