When is a Form 1099-C not taxed?


Quick Answer

The amount reported on Form 1099-C, Cancellation of Debt, is not taxable if it meets an exception or exclusion, states the IRS. Examples of exceptions include amounts specifically excluded from income by law, cancellation of certain qualified student loans and qualified purchase-price reductions given by a seller, as of 2015.

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Full Answer

Examples of exclusions include debt cancelled in a Title 11 bankruptcy case, debt cancelled during insolvency and cancellation of qualified farm, qualified real property business or qualified principal residence indebtedness, according to the IRS. The exclusion for qualified principal residence indebtedness allows taxpayers to exclude up to $2 million, or $1 million if married filing separately, as of 2015.

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