I settled 2 cards last year, received 1099-C's for both (as expected).
Before completing the settlement process, I spoke with a CPA about the tax implications, and specifically about Insolvency. (lol, he actually suggested that I speak to a BK lawyer before I completed these settlements). I told him what was going on, and told him that I thought I wouldn't have to pay taxes on the amount of debt discharged, because I would be insolvent at the times of settlement. He didn't know what I was talking about, and said something about having to reduce my basis (or something like that) on my rental property? And if that is what I am supposed to do (reducing rental property basis), does that just mean that I will start receiving less depreciation, and also, does it still mean that I won't have to pay taxes on the forgiven CC debt from last year?
I've read Publication 4681 (Canceled Debts, Foreclosures, Repossessions, and Abandonments) until my head hurts. I've already completed 2 separate Insolvency Worksheets (one for each 1099-C), and I am insolvent for both. I'm confused about the form 982. I understand that I fill in Part 1, box 2, and check mark Part 1 box 1b. I'm confused which box I fill in under Part 2.
If anyone who has completed this process before has any pointers, I'd really appreciate it. I've done my own taxes for almost a decade, which have been pretty straight forward up until now, and I'm not going to throw in the towel and go pay someone to do my taxes for me! (not just yet anyway)
Thanks ahead of time!
Before completing the settlement process, I spoke with a CPA about the tax implications, and specifically about Insolvency. (lol, he actually suggested that I speak to a BK lawyer before I completed these settlements). I told him what was going on, and told him that I thought I wouldn't have to pay taxes on the amount of debt discharged, because I would be insolvent at the times of settlement. He didn't know what I was talking about, and said something about having to reduce my basis (or something like that) on my rental property? And if that is what I am supposed to do (reducing rental property basis), does that just mean that I will start receiving less depreciation, and also, does it still mean that I won't have to pay taxes on the forgiven CC debt from last year?
I've read Publication 4681 (Canceled Debts, Foreclosures, Repossessions, and Abandonments) until my head hurts. I've already completed 2 separate Insolvency Worksheets (one for each 1099-C), and I am insolvent for both. I'm confused about the form 982. I understand that I fill in Part 1, box 2, and check mark Part 1 box 1b. I'm confused which box I fill in under Part 2.
If anyone who has completed this process before has any pointers, I'd really appreciate it. I've done my own taxes for almost a decade, which have been pretty straight forward up until now, and I'm not going to throw in the towel and go pay someone to do my taxes for me! (not just yet anyway)
Thanks ahead of time!