Cancellation Of Debt - COD
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 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. |
Related Definitions
Articles Of Interest
-
A Lifeline For Those Drowning In Debt
Don't wait to be saved, find out where the lifesaving devices are and hang on tight! -
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. -
No Debt Forgiveness For The Tax Man
Debt settlement sounds like a free lunch, but it has tax consequences. -
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. -
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 ... -
Top 7 Most Common Financial Mistakes
Choose fortune over disaster by avoiding these money traps. -
How Line of Credit Works
A line of credit is an arrangement where a bank offers a maximum loan amount that the borrower can draw upon at any time. The borrower – which can be an individual, business or government ... -
What's On A Consumer Credit Report?
A look at the various components and considerations that go into one's credit report and credit score. -
Outfox The Debt Collector's Hounds
Dealing with a collection agency is scary if you don't know your rights. We help you take back the power. -
Reasons You Should Use Your Credit Card For Purchases
Paying for everything with your credit card will earn you rewards and protect you against fraud, among other benefits.
Free Annual Reports