Cancelled Credit Card Debt

[Yardley CPA]

I have a client who received two 1099-C forms reflecting cancelled credit card debt amounting to over $11,000. The cancelled debt is not the result of a bankruptcy. I know it is taxable for federal purposes, but I am unable to verify whether it should be included on the New Jersey return?

I was not able to find anything pertaining to cancelled debt in the New Jersey instructions which leads me to believe it is not taxable, however, I would like to be sure.

[Crank]

Sorry I dont have an answer for you but I need to know the same thing for Pennsylvania.

As for the federal, my client has about $41,000 in cancelled credit card debt for which he received 1099-C's. If I am reading Publication 4681 correctly the debt can be excluded from income if the client was insolvent immediately prior to the cancellation of the debt. My clients net worth was negative $132,000 ... so far. Still waiting to value a few more assets and liabilities.

[jklcpa]

Crank, here's a link to PA guide to individual taxes that will help you: http://www.revenue.state.pa.us/portal/server.pt/community/revenue_home/10648

Clicking on the first link to a PDF is for chapter 24 of PITGuide. The discussion of cancellation of debt starts on pg 7.

[Crank]

Thanks JKL!

Yardle, sorry I didnt mean to hijack your thread. Hopefully someone wil be along shortly to help you with the treatment of NJ cancelled debt.