Will I owe taxes on truck loan
I received a no asset chap 7 bankrtupcy discharge Jan 2008. A dump truck, financed with a bank, is still in my posession and the bank is willing to let me have the title, lien free, in exchange for a CD they have been holding for collateral. They do not want the truck anymore. Will I owe tax on the forgiven amount since this entire debt was discharged in the bankruptcy. I would like to keep the truck. Would this arrangement constitute a new contract with the bank? I could not afford to pay taxes on the large amt that will be written off by the bank.
1 Answer from Attorneys
Re: Will I owe taxes on truck loan
You have the right idea about discharge of indebtedness income (DOI). Often you do have to recognize income in an amount equal to a debt of which you are relieved. However, there are several exceptions to this (found in sec. 108 of the Internal Revenue Code). The one that is applicable to your case is that you do not have to recognize DOI if the discharge occurs while you are in bankruptcy. File Form 982 with your tax return to deal with the DOI and invoke the sec. 108 exception.
Related Questions & Answers
Pre-tax payroll deductions I would like to know if payroll deductions for health... Asked 12/08/08, 3:33 pm in United States Maryland Tax and Taxation Law
Tax evasion what is the punisment for tax evasion? Asked 2/13/08, 2:15 pm in United States Maryland Tax and Taxation Law
Capital gains tax on property MY mother has given my brother and I a house free and... Asked 10/17/07, 2:53 pm in United States Maryland Tax and Taxation Law
Non-filer tax returns The IRS created tax returns for me. Is it too late to file my... Asked 6/11/07, 10:07 pm in United States Maryland Tax and Taxation Law
Non profit what is the difference between a non-profit, and not-for-profit... Asked 3/29/07, 4:44 pm in United States Maryland Tax and Taxation Law