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Bankruptcy? How to Avoid Taxes on Cancelled Debt

If bankruptcy or foreclosure happened to you in 2013, you could still owe the Internal Revenue Service. Tax expert Dan Pilla explains how to avoid insult to injury. Read Transcript


PAT: LAST FEW YEARS, MANY BAD

THINGS HAPPENING IN REAL ESTATE.

YOU HAVE FORK FORECLOSURES AND

SHORT SALES, PEOPLE GOING INTO

BANKRUPTCY.

YOU THINK AFTER I HAVE DONE THAT

SURELY THAT IS THE

END.

ANSWER IS

IT IS

NOT

THE END.

THERE ARE WORST THINGS THAT CAN

HAPPEN BECAUSE

YOUR

FRIENDS AT

THE IRS

CAN SHOW

UP AN

D

SAY

OH,

BY THE

WAY, YOU OWE A LOT MORE.

REPORTER: IT IS BAD ENOUGH TO

HAVE YOUR CAR REPOSSESSED OR

FILE FOR BANKRUPTCY AND IT COULD

GET WORSE WITH A 1099 C SAYING

YOU RECEIVED INCOME WHEN YOUR

DEBT WAS FORGIVEN.

THE IRS EXPECTS YOU TO PAY TAXES

ON NON-EXISTENT INCOME TURNING A

DIFFICULT FINANCIAL SITUATION

INTO AN IMPOSSIBLE ONE.

YOU DON'T HAVE TO ADD INSULT TO

INJURY AND DON'T HAVE TO PAY

TAXES ON DEBT "HOW TO ELIMINATE

TAXES ON DEBT FORGIVENESS."

IT IS A STEP BY

STEP GUIDE

ON

PAYING

TAXES

ON

CANCELLED DEBT.

PAT: HERE IS THE BOOK

PRETTY

COLOR, RED, WHITE, AND

BLUE

.

HOW TO

ELIMINATE TAXES ON DEBT

FORGIVENESS.

DAN PILLAR IS HERE.

GOOD TO SEE YOU.

PAT: YOU TALK ABOUT THE

1099

C.

HOW MANY OF THOSE THINGS HAVE

GONE OUT?

PAT, SINCE 2008 WHEN AMERICA

STARTED IN THIS FINANCIAL

DOWNTURN, AT LEAST FIVE MILLION

A YEAR.

THIS IS A RESULT OF BANKRUPTCIES

AND FORECLOSURES AND SHORT

SALES.

FIVE MILLION TAX PAYORS A YEAR

WHEN THE IRS COMES ALONG,

DIFFICULT FINANCIAL SITUATION

TURNS INTO AN IMPOSSIBLE ONE.

PAT: I HAVE LOST MY HOME,

LOST ANYTHING, BANK HAS TAKEN IT

AWAY IN FORECLOSURE BECAUSE A

DEBT HAS BEEN WRITTEN OFF, THEY

SAY I HAVE AN INCOME?

THIS IS A REAL EASY TO

UNDERSTAND WHEN WE ARE TALKING

ABOUT A CREDIT CARD.

LET'S SAY YOU GET A CREDIT CARD

RUN UP $10,000 WORTH OF DEBT ON

A CREDIT CARD WHEN YOU TAKE THE

MONEY OFF THE CREDIT CARD AND

SPEND IT, THAT IS NOT CONSIDERED

INCOME.

IT IS A LOAN.

WHEN YOU PAY BACK THE LOAN, YOU

DON'T GET A TAX DEDUCTION.

MAYBE THE INTEREST.

NOW YOU HAVE RUN UP $10,000

WORTH OF CREDIT CARD AND DON'T

PAY IT BACK.

IT IS FORGIVEN IN BANKRUPTCY OR

NEGOTIATE WITH THE KWET CREDIT

CARD.

NOW YOU HAVE $10,000 IN LOAN

PROCEEDS AND NEVER PAID THEM

BACK.

IRS TAKES THE POSITION CHARACTER

CHANGES OF THAT OF LOAN AND NOW

INCOME AND WANT TAX ON THE

FORGIVEN DEBT.

PAT: EVEN THOUGH YOU ARE IN

BANKRUPTCY?

COULD BE THE WORST POSSIBLE

TIME.

AS A MATTER OF FACT FOR PEOPLE

GOING THROUGH THIS, PAT, IT IS

THE WORST TIME OF THEIR LIFE.

PAT: THAT IS HORRIBLE.

YOU ARE ON THE FLOOR, GASPING

FOR BREATH AND THEY PUT THEIR

FOOT ON YOUR NECK.

HERE IS WHAT THE GOOD NEWS

IS.

THIS IS WHAT I TALK ABOUT IN THE

BOOK HOW TO ELIMINATE TAXES ON

DEBT FORGIVENESS.

SO MANY EXCEPTIONS TO THE RULE.

THEY ARE NOT GOING TO OWE THE

TAX.

THE IRS DOESN'T TELL YOU THE

EXCEPTIONS.

THEY JUST MAIL OUT THE 1099.

YOU AS THE TAX PAYOR HAVE TO

KNOW THE EXCEPTIONS.

GIVE ME ONE OR TWO HAPPY

EXCEPTIONS.

ONE THAT APPLIES ALMOST

ACROSS THE BOARD.

IF YOU ARE INSOLVENT AS OF THE

DAY THE DEBT IS FORGIVEN, THAT

CANCELLATION IS NOT TAXABLE

INCOME.

DEFINITION IS SIMPLE, SUM OF ALL

OF YOUR DEBTS EXCEEDS THE VALUE

OF YOUR ASSETS YOU ARE

INSOLVENT.

ONLY ASSET IS A $5,000 CAR, YOU

HAVE $10,000 WORTH OF CREDIT

CARD, YOU ARE INSOLVENT BY

$5,000.

IF THE CREDIT CARD DEBT IS

FORGIVEN, YOU ARE NOT TAXED.

MOST OF THESE PEOPLE ARE

INSOLVENT.

I SHOW YOU A CALCULATION, I TAKE

YOU STEP BY STEP THROUGH THE

PROCESS FIGURING OUT THE VALUE

OF THE ASSETS AND HOW TO

CALCULATE YOUR DEBT AND HOW TO

PRESENT THAT TO THE IRS.

PAT: YOU HAVE TO MAKE THE

CASE.

THAT IS EXACTLY RIGHT.

NONE OF THIS APPLIES

AUTOMATICALLY.

AS A MATTER OF FACT, THERE IS A

TAX TOMORROW THAT YOU CAN PUT

WITH YOUR TAX RETURNS, SO IF YOU

GET A 1099 C, MILLIONS HAVE FOR

THIS FILING SEASON.

THERE IS A FORM YOU CAN PUT WITH

YOUR TAX RETURN THAT EXPRESSES

WHAT THESE ARE.

PAT: WHERE DO PEOPLE GET THIS

BOOK?

AVAILABLE FROM CBN.COM THERE

IS A LINK TO ORDERED IR THE

MATERIAL.

PAT: "HOW TO ELIMINATE TAXES

ON DEBT FORGIVENESS."

I APPRECIATE DAN FOR THIS

HELPFUL REMINDER.

YOU CAN LEARN THE SECRETS.

YOU NEED THE SECRETS.

SHOULDN'T BE ALL THIS HIDDEN.

ARE THEY EVER GOING TO REFORM

THAT MONSTROUS CODE?

I AM WORKING FOR IT.

PAT: MAYBE IT WILL PUT YOU

OUT

OF

BUSINESS.

I'LL HAVE TO GET A JOB

SELLING

SHOES.

TAXES

CBN.COM.

EMBED THIS VIDEO


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