Tax Q & A: Canceled Debt
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This daily tax season column publishes questions from readers with answers from local members of the California Society of Certified Public Accountants.
Q: I fell behind on my credit card payments, and the company sent me a 1099-C form reflecting the $3,000 that I owe them. The company says it has canceled the debt and that I have to pay income tax on that amount. Can that be possible?
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A: Yes. If a debt you owe is canceled or forgiven, you generally must include the amount in your gross income. This includes credit card bills, loans and mortgages. There are a few exceptions, such as debts that are canceled in a bankruptcy case and student loans that have forgiveness provisions. That doesn’t sound like your case, however.
--ODED SIMHA, CPA, Tarzana
For more information on taxes and to see other questions and answers in this series, go to the Times Web site http://cache.nohib.com./taxes. To find a CPA, visit the California Society of CPAs at https://www.calcpa.org.
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