October 2011

Sun Mon Tue Wed Thu Fri Sat
            1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30 31          
Disclaimer
The Tax Law Report is not intended or written to be used, and may not be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer by the IRS.
Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported

« Where do You Get Your Finance News From? | Main | The Effect of Life Insurance Tax-Free Build-Up on the U.S. Treasury Coffers »

October 22, 2009

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a010536e92592970b0120a6128c06970b

Listed below are links to weblogs that reference Settlement of Disputed Debt Does Not Result in Cancellation of Debt Income:

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

If the settlement is after a lawsuit is commenced, and the debtor answered with a general denial of the debt owed, would this be sufficient evidence of a good faith dispute? Would you have to carve out the amounts that would be taxable?

Not necessarily. See Preslar v. Commissioner, 167 F.3d 1323, 1328 (10th Cir. 1999) ("The mere fact that a taxpayer challenges the enforceability of a debt in good faith does not necessarily mean he or she is shielded from discharge-of-indebtedness income upon resolution of the dispute. To implicate the contested liability doctrine, the original amount of the debt must be unliquidated. A total denial of liability is not a dispute touching upon the amount of the underlying debt.").

There seems to be some disagreement among the circuit courts as to the reach of the disputed debt theory.

If a debt has been disputed can debt be reported as income to the IRS?

If the debt arises from a credit card and there is a subsequent settlement after a lawsuit answered with a general denial and a Counterclaim alleging unfair and deceptive acts and practices, violations of the Truth in Lending Act Reg.Z CFR sec.226.10 and violations of 15 U.S.C.A. sec.1637 would this be evidence of a good faith dispute

If the debt arises from a credit card and there is a subsequent settlement after a lawsuit answered with a general denial and a Counterclaim alleging unfair and deceptive acts and practices, violations of the Truth in Lending Act Reg. Z CFRT sec.226.l0 and violations of 15 U.S.C.A., sec. 1637 would this be evidence of a good faith dispute.

The comments to this entry are closed.

Enter your email address:

Delivered by FeedBurner

Twitter Updates

    follow me on Twitter
    Blog powered by Typepad