https://ttlc.intuit.com/replies/5107826
Even
if you receive a Form 1099-C from a lender, you still may be able to avoid
taxation on the forgiveness of a debt. If your debt was discharged in a Title
11 bankruptcy proceeding, such as a Chapter 7 or Chapter 13 case, you're not
responsible for taxes on that debt.
If
you can demonstrate to the IRS that you were insolvent at the time the debt was
cancelled, you can similarly avoid taxes on that debt. Certain other types of
debt, including qualified farm indebtedness and qualified real property
business indebtedness, can also avoid taxation in the event of cancellation.
The 1099-C you received must be reported on your tax
return. A copy of 1099-C that you received will also
be reported to the IRS and therefore you are required to file it on your
income tax return. Otherwise you will receive a letter from the IRS about
not reporting the 1099-C. However, If
you can demonstrate to the IRS that you were insolvent (unable to pay debts
owed) at the time the debt was cancelled, you can similarly avoid taxes on
that debt. But you still MUST report it on your tax return. (see
instructions below on how to enter your 1099-C)
We
generally recommend using the CD/Download
version of TurboTax Deluxe or a higher edition. I notice that
you are currently using our TurboTax online product. If you have not paid
anything yet, you can easily cancel and change to the desktop version for your
return.
Borrowers who exclude the discharge of indebtedness
income must report both the amount of the income and any resulting reduction in
basis or tax attributes on Form
982, Reduction of Tax Attributes Due to
Discharge of Indebtedness (and Section 1082 Basis Adjustment).
https://ttlc.intuit.com/replies/3300673
https://ttlc.intuit.com/replies/3301892
