Canceled Debt Income Tax Question

Canceled Debt Income Tax Question

I entered into an agreement to purchase a lot in a coastal subdivision in South Carolina.

Subsequently, I was informed by an attorney in Virginia where I reside that my purchase of this property and many other people was real estate fraud perpetrated by the seller, the developers, the appraisers, the closing attorneys, and the banks who made the loans.

The FBI investigation into this and the lawsuits surrounding this are currently ongoing and it is also in the Federal court system as well.

When I learned this, I made the decision to stop making payments including the payments to the bank, the HOA dues and the real estate taxes.

I was referred to an attorney in South Carolina to handle my case as the bank decided to foreclose.

My attorney subsequently had me countersue for
fraud. Ultimately, it was settled out of court. The bank allowed me to do a deed in lieu of and my debt was forgiven.

Now, I have a 1099-C for the
amount of $255,990. I do not have the money to pay taxes on this if it is ordinary income.

My question is would the infirmity exception apply here and how would I handle this on my tax return? The deed in lieu of and the 1099-C are for
the 2010 taxable year, the one I am getting ready to file.

The original contract purchase price was $359,990 and the amount of the bank loan was $323,991. All closing costs were paid by the seller who committed the fraud.

The amount on the 1099-C is $255,990 and I'm not even sure how they arrived at that figure. All payments were interest only as the terms of the loan were interest only payments for 3 years with a balloon at the end.

The "infirmity exception" allows a taxpayer to treat debt reduction negotiated with third parties as purchase price adjustments to the extent that the debt reduction by the third-party lender is based on an infirmity that clearly relates back to the original sale (e.g., the seller's inducement of a higher purchase price by misrepresentation of material fact or fraud). I believe this falls uner 26 U.S.C. Section 108(e)(5) of IRC

Debt Consolidation Money

Last yr I went through a company to consolidate my large credit card debt. Last yr, I settled with one of them and payed them off, but I got about $3000 taken off what I owed. I recieved a 1099 c I believe. When I tried to go on line to do my taxes, I went to that area of 1099s but found no place to enter this information. Do I need to do this? And will this affect my refund?

Debt Settlement Tax Question

by RJ
(Whitesboro, NY, USA)

Debt

Hello,

My spouse enrolled in a credit card debt settlement program last year where they settled on about $22K. Because of this decision we owe about $7,000 in taxes.

Is there anything out there that can help us reduce what we own on the taxes? The reason why she went through the settlement program was due to financial hardship.

Our tax advisor told us that there was nothing that we could do. However, we called the IRS and they stated that as long as our debts are higher than our assets there is something we can do.

Please clarify what our options are.

Thank you.

Debt Settlement Costs

Can I deduct the costs/commissions that my settlement comany charged for negotiating the cancelation of some of my credit card debt that I have to claim, because it becomes 1099C income? And if so where would I enter the deduction?

I Owe

by Valerie
(IL.)

The state of IL. paid me to much money two years ago, and are asking for the money back. What happens if I cant pay it right now?

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