Comment: Debtorboards - Sue Your Creditor and Win! - Info Center

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Debtorboards - Sue Your Creditor and Win! - Info Center

I found this site useful..... http://www.debtorboards.com

Here is a good example...

Question:

"Everything has been quiet as a church mouse, until I received a letter from the IRS stating that Chase Manhattan forgave an alleged debt back on 12/31/2005 and now I supposedly owe income tax and penalties on my 2005 Tax return. I never received squat from Chase Manhattan before which includes, letters, 1099c or anything. The original alleged debt was with Bank One of Delaware NA a/k/b First USA Bank NA. How would Chase Manhattan have anything to do with this alleged debt? I originally sent a Validation request to Mann Bracken concerning the alleged debt from First USA Bank NA back in early 2003. They did not respond nor did they purue their threat of Arbitration. The last payment on the original debt to First USA Bank Na was 11/15/2001. On the IRS paperwork is listed Chase Manhattan in Texas and it listed a date of sale of 12/31/2005. What do you learned ones think of all this and what if anything can I do to squeek by on this?"

Answer:

"Actually (and speaking as an Enrolled Agent) I wouldn't be panicking yet either. There is a significant loophole in the taxability of discharged debt that many people facing this issue overlook.

I direct you to Internal Revenue Code Section 108(a)(1)(B) and 108(a)(3) which allows a taxpayer to exclude from income "indebtedness that occurs while the taxpayer is insolvent (but not involved in bankruptcy proceedings) up to the amount by which the taxpayer is insolvent."

Translated into common language and everyday usage, as long as, after the debt cancellation, you still owe more than you own then you can exclude the cancelled debt from your income and tell the IRS to stuff their 1099C. In the absence of anything to the contrary, IRS will always assume the taxpayer solvent and the 1099C is fully taxable.

How do you show you are insolvent? First, let's take a look at the concept of insolvency. ...... "
http://www.debtorboards.com/index.php/topic,4207.0.html

I found this fascinating....