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Some lenders required to file Form 1099-A must also issue Form 1099-C, Cancellation of Debt, for debt discharges. Taxpayers involved in these transactions will have to consider a recent code change--the 2004 American Jobs Creation Act amended section 108(e) (8) on cancellation of debt in exchange for a partnership interest--in addition to the rules established in MAS One. Defer Bad Debt Cancellation: Cancellation of debt generally results in taxable income to the debtor to the extent that the amount settled for exceeds the outstanding debt balance. |
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