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1099-C Cancelled Debt and Tax Court

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1099-C Cancelled Debt and Tax Court

In a recent Tax Court decision, a taxpayer was slammed for ignoring a Form 1099-C on canceled debt and failing to file a return—even though he wasn’t working and made no income in that year.

In that case, the Court stated the following:

“Although petitioner received those Forms 1099-C, he chose to ignore them when the time came to file his Federal income tax return (return) for 2010. Instead, petitioner determined that because he did not earn wages that year he did not have an obligation to file a return for 2010, and he acted accordingly.”

The Tax Court was unconvinced that the taxpayer was insolvent, despite evidence being put on the record that his assets exceeded his liabilities.  The taxpayer simply failed to substantiate his claims with proper parpework.

All of this could have been avoided.  The taxpayer could have filed his Form 1040 and attached Form 982.


Category: Tax

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