Menu Contact
The Gartzman Law Firm, P.C. Tax Law Attorneys
Contact Us Today For A Free Phone Consultation
770-648-0689

Cancelled Debt Can Result In Taxable Income - Part Two

With the recent economic downturn experienced by many taxpayers, there is a tax concept that is very important: cancellation of debt. You would think that the cancellation of debt by a credit card company or mortgage company would be a good thing for the taxpayer. And it can be, but it can also be considered taxable income by the IRS. Part two of various debt cancellation situations is listed below and part one of 'Cancelled Debt Can Result In Taxable Income' is available on thisAtlanta tax attorney blog as well.

  • Primary home. If your home is "short" sold or foreclosed and the lender receives less than the total amount of the outstanding loan, you can also expect that amount of debt cancellation to be reported to you and the IRS.
  • But special rules allow you to exclude up to $2 million in cancellation income in many circumstances. You will again need to complete IRS Form 982, but the exclusion from taxable income brought about by the debt cancellation on your primary residence is incredibly liberal. So make sure to take advantage of these rules should they apply to you.
  • Second home, rental property, investment property, business property. The rules for debt cancellation on second homes, rental property, and investment or business property can be extremely complicated.
  • Generally speaking, the new laws that cover debt cancellation don't apply to these properties, and the IRS considers any debt cancellation income taxable.
  • Nevertheless, given your cost of these properties, your financial condition, and the amount of debt cancelled, it's still possible to have this debt cancellation income taxed at a preferred capital gains rate, or even considered not taxable at all.

Be aware that many of the special debt cancellation provisions are set to expire at the end of 2012. If you're unsure as to how debt cancellation affects you, contact Gartzman Law Firm office at 770-939-7710 to review your situation and determine how much, if any, cancelled debt will be taxable income to you.

No Comments

Leave a comment
Comment Information

Contact Our Firm

The Gartzman Law Firm, P.C.
2851 Henderson Mill Road
Atlanta, GA 30341

Phone: 770-648-0689
Fax: 770-939-7743
Atlanta Law Office Map

Contact Us For A Free Telephone Consultation

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Get In Touch