Elena and I pay $25 per month to have the New York Times delivered to us on Sundays. This works out to be $300 per year. Like all newspapers, the print edition of The New York Times is not what it used to be. (On the other hands the website is great!) I have been tempted to cancel my subscription. Yesterday I was reading an article about income taxes in the paper. One paragraph in the article talked about a subject "near and dear" to my heart. When one makes a settlement with a credit card company or other lender for an amount of money less than the balance due, the difference is technically considered income. At the end of the year you get a form 1099 from the lender that becomes part of your taxable income. Elena and I had a brilliant legal team who settled some $140,000 in credit card debt and saved us $110,000. We got form 1099's from various credit card companies for all of the money saved. It pushed our income for this year well above $300,000 and produced some serious tax problems and tensions.
The article yesterday pointed out that such debt forgiveness income is not applicable in 3 cases as follows:
1) When the debt involves one's personal residence.
2) When a taxpayer is somewhere in the bankruptcy court process.
3) When the taxpayer is insolvent with debts greater than assets.
Elena and I are technically insolvent. Our house has fallen so much in value that we have a negative net worth. Thanks to the information we got from The New York Times, we were saved a possible tax liability of $30,000+!!
All of us would love to make a $300 investment and get a $30,000 return!
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