How Do You Prove Insolvency to the IRS?

Answer

To prove insolvency form 982 must be filed with income taxes. A person can be considered insolvent if their total debt exceeds the fair market value of all their debts.
Reference:
Q&A Related to "How Do You Prove Insolvency to the IRS?"
1. Compile your 1099-Cs if you received more than one and add up the entire amount. For example, if you owe $10,000 on a credit card and you settle the debt for $5,000, the credit
http://www.ehow.com/how_4780039_file-insolvency-ir...
Cathy's a little bit off. Get IRS publication 4681. Do the insolvency worksheet on page 6. This includes every debt (INCLUDING the cancelled one) and the FMV of every asset just before
http://answers.yahoo.com/question/index?qid=201103...
You did not receive 1099-A; you received 1099-C, which is cancellation of debt. It is income. But since your house was repossessed, you have a sale. Now you have to figure out your
http://www.askmehelpdesk.com/taxes/how-can-prove-i...
Katrina, Insolvency is when your total debts exceed your total assets. When using the insolvency exception to avoid paying tax on the cancellation of debt, you need to include Form
http://en.allexperts.com/q/Tax-Law-Questions-932/2...
2 Additional Answers
To prove insolvency to the IRS, you will need to create a financial statement. On this statement, you would compare your assets to your liabilities. If your liabilities outweigh your assets, you can declare that you are insolvent.
The best way to prove insolvency to the IRS is to prepare a financial statement that compares the value of your assets to your liabilities. Once you have that, file IRS Form 982, called 'Reduction of Tax Attributes Due to Discharge of Indebtedness' with your tax return. In addition, you should send a detailed letter to the IRS, which included your financial statement to prove your insolvency. In some cases, this may lead to an audit, so it is always best to be truthful on your statement to avoid fines and other penalties.
About -  Privacy -  Careers -  Ask Blog -  Mobile -  Help -  Feedback  -  Sitemap  © 2014 Ask.com