the IRS typically classifies cancelled debt as income because you received a payment when you purchased and you never paid it back. However there are exceptions such as bankruptcies, read here:
https://turbotax.intuit.com/tax-tips/debt/when-to-use-tax-form-1099-c-for-cancellation-of-debt/L24iT...
The TT interview should walk you through reporting and if you qualify for any exceptions.
To enter your 1099-C:
- Open (continue) your return, if it's not already open.
- In the TurboTax program, search for 1099-C or 1099C (lower-case also works) and then click or tap the "Jump to" link in the search results.
- Select the type of cancelled debt (main home or other) and then click or tap Continue.
- If using Free Edition, follow the prompts to upgrade to Deluxe.
- Follow the onscreen instructions to enter information from your 1099-C.
Exclusions from Income for:
- Cancellation of qualified principal residence indebtedness, better known as mortgage debt relief;
- Debt cancelled in a Title 11 bankruptcy;
- Debt cancelled during insolvency (the amount exceeding your assets);
- Cancellation of qualified farm or real property indebtedness.
If the debt qualifies for any of these exclusions, TurboTax will complete Form 982 and include it with your return.
I hope this was helpful?
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