Insolvency question

Mar 20, 2008 4 Replies
W

My girlfriend's w-2 lists 2519.70 in wages. 148.91 in Fed tax



She recieved a 1099-c for debt canceled (automobile loan) of



1761.19.

She has no assets. (bad divorce) I was told she could declare insolvency, ( by someone in this group) If she met the no assets criteria. I have downloaded and filled out form 982. So, is there anything I am missing in this procedure? Just attach form 982 along with the 1040 and send in(?) or is there more to it? Also I am assuming I do not show the 1761.19 on the 1040 as it is onform 982.



BTW I have declared her as a dependent, as she lived with me all year.



Thanks for any help


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D

She's not insolvent. As her income exceeded the debt, she had sufficient funds with which to pay it off but chose not to. I am intentionally disregarding living expenses since her total income wouldn't cover those anyway (and by you declaring her as your dependent, you're paying for her living expenses anyway).

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H

Perhaps the debt cancellation is considered gross income and when added to her wages results in a total greater than 3,400. If that is the case then you can't claim her as a dependant.

========================================= MODERATOR'S COMMENT: Please delete all unnecessary material from the prior post when responding.

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W

The cancellation of debt (1099-c) was in August, the income was in Sept-Nov. What I read on the IRS web site was "insolvent" at the time of the cancellation of debt. Make sense (?) or do I need more of an education ?

Thanks

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P

Then it's not income. All she does is file the necessary form with her

1040.
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