CANCELLATION OF DEBT INCOME
You owe money. Then the debt gets cancelled. There is a risk that the cancelled debt will be treated as income to be included in your gross income that forms the basis for your income tax liability.
Debt cancellation is becoming more common as this economic crisis grows. Unpaid purchases, credit card debt, mortgage forgiveness, unpaid rent, etc. These breaks are surely helpful in the face of financial stress, BUT:
Don’t let the BUT bite you in the butt. There are exemptions, and strategies to mitigate the risks.
The most common exemption is bankruptcy. However, that is strong medicine. Before you go that route, confer with a knowledgeable advisor who can analyze your situation and steer you to means and methods to deal with cancellation of debt income.
We can help.
Please feel free to call us to discuss the options available to you and/or your business. We can be reached at (845) 778-2121.
This is not intended to be legal advice. You should contact an attorney for advice regarding your specific situation.
Gerald Jacobowitz is of counsel with the firm and practices Environmental/Land Use, Real Estate, Municipal and Business Law. He can be reached by phone at 845-764-9656 and by email.