Cancellation Of Debt - COD

Filed Under » ,
Dictionary Says

Definition of 'Cancellation Of Debt - COD'

When a creditor forgives a debt without requiring consideration in return. The amount of debt that is forgiven by cancellation of debt is considered income to the debtor and must be reported as a result. In most cases, it is taxable as ordinary income and is known as cancellation-of-debt (COD) income.

In some cases, this debt is from one country to another and is partially or fully wiped away to help rebuild the nation.

Investopedia Says

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.

Articles Of Interest

  1. A Lifeline For Those Drowning In Debt

    Don't wait to be saved, find out where the lifesaving devices are and hang on tight!
  2. Don't Put Off Your Year-End Tax Plan

    From sales tax deductions to credit reports, check out what items should be on your financial checklist.
  3. No Debt Forgiveness For The Tax Man

    Debt settlement sounds like a free lunch, but it has tax consequences.
  4. 3 Retirement Plan Moves To Make Before Year-End

    If you don't know what must be done before December 31 you may miss opportunities - or even pay penalties.
  5. What are the differences between chapter 7 and chapter 11 bankruptcy?

    Chapter 7 bankruptcy is sometimes also called liquidation bankruptcy. Firms experiencing this form of bankruptcy are past the stage of reorganization and must sell off any un-exempt assets to ...
  6. Top 7 Most Common Financial Mistakes

    Choose fortune over disaster by avoiding these money traps.
  7. 10 Steps To Help Erase Errors On Your Credit Report

    According to a study conducted by the Federal Trade Commission, one in four consumers identified errors on their reports that might affect their credit rating in 2013.
  8. How To Reduce Your Debts Without Spending Unnecessarily

    While it is not possible to repay your debts without investing money into the process, you should avoid spending unnecessary sums of cash in the pursuit of a financially liberated future.
  9. The Basics Of Lines Of Credit

    Lines of credit are potentially useful hybrids of credit cards and normal loans. Learn how a line of credit can help (and hurt) your finances, and how to find the best one to suit your needs. ...
  10. Should You Borrow Money To Make Investments?

    It's high time investors heed the yellow caution flags waving in front of their margin accounts. Much like the NASCAR driver who pumps his brakes to avoid disaster when he sees the caution flag, ...
comments powered by Disqus
Marketplace
Hot Definitions
  1. Network Effect

    A phenomenon whereby a good or service becomes more valuable when more people use it. The internet is a good example...
  2. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...
  3. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.
  4. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.
  5. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.
  6. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...
Trading Center