How does the IRS determine a home value when calculating if tax payer was insolvent after “settling” a debt?
Question by butkus: How does the IRS determine a home value when calculating if tax payer was insolvent after “settling” a debt?
I “settled” with several credit companies for over $ 40,000 in debt. The IRS considers the settlement amount as earned income unless the tax payer was “insolvent” at the time of the settlement. My home has minimal equity but I don’t know how to determine the value the IRS will use in calculating my debt to income ratio. It could make a big difference in my tax liability for the past year but was better than filing for bankruptcy or losing my home. This question even seems to stump tax advisors. Any wisdom out there in Yahoo land would be appreciated.
Answer by geek49203
Yes, get the best CPA and/or Tax Atty you can. Cudos on what you’ve done so far, but you’re in a “jungle” and you need a “jungle guide” or you’re gonna get killed.
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