MONEY MANAGEMENT, RURAL MONEY RESOURCES

How To Avoid Taxes With The Debt Cancellation Law

Debt Cancellation Law

Is Your Cancelled Debt Taxable, Or Not? If you borrow money and legally obligated to repay a fixed or determinable amount at a future date, you have a debt; but there is a debt cancellation law. According to the IRS, you may be personally liable for a debt or may own a property that’s subject to a debt. If your debt is forgiven or discharged for less than the full amount you owe, the debt is considered canceled in the amount that you don’t have to pay. The law provides several exceptions, however, in which the amount you don’t have to pay isn’t canceled debt. These exceptions will be discussed later. Cancellation of a debt may occur if the creditor can’t collect, or gives up on collecting, the amount you’re obligated to pay. If you own property subject to a debt, cancellation of the debt also may occur because of…

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