Clarification needed on insolvency

jdubblep — Mon, 31 Jan 2022 18:27:07 GMT

I had debt forgiven as part of a settlement; not bankruptcy related.

If I understand it correctly, my total debts way over my total assets, and that means I do not have pay taxes on the amount forgiven?

Re: Clarification needed on insolvency

ColeenD3 — Wed, 02 Feb 2022 19:08:32 GMT

Yes, in theory, but you may need to download an Insolvency Worksheet to back your claim.

For Form 982, "Check the box on line 1b if the discharge of indebtedness occurred while you were insolvent. You were insolvent to the extent that your liabilities exceeded the fair market value (FMV) of your assets immediately before the discharge. For details and a worksheet to help calculate insolvency, see Pub. 4681."

Please see this LINK for more information regarding insolvency.

Here is a LINK for the worksheet.

[Edited 2/2/2022|2:08pm EST]

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Clarification needed on insolvency

Re: Clarification needed on insolvency