 |
Investopedia explains 'Cancellation Of Debt - COD'
If the cancellation of debt is taxable, the debtor will receive a 1099-C at year-end that reports the amount of debt forgiven as taxable income. For example, if a bank lent $10,000 to you and you pay back $6,000, then are unable to pay the remainder, the bank can forgive the $4,000 difference, which will be recorded as income for you.
Cases in which debt forgiveness is not considered income include bankruptcies, insolvencies, certain farm loans and non-recourse loans.
|