It depends. You must use the Insolvency Worksheet to see if you qualify, it is included in the publication link below.
- See IRS Publication 4681 for more information about insolvency. This is a worksheet that is prepared to determine if you can qualify for eliminating taxable income form a cancelled debt (Form 1099-C). Keep it with your tax files to show proof, as well as any other documentation to substantiate it, should you need it later.
If you do not qualify for insolvency or you the cancelled debt was not included in bankruptcy, then the amount reported is taxable.
@Raymond316
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