What are you looking for?
I'd venture a guess that you need some solid income tax advice. Otherwise, why would you be here?
I'm David Stonehill, and I've been practicing law for over 34 years. The past 8 years have been a razor-sharp focus on all the vagaries of federal taxation of cancellation of debt income (often referred to in the trade as "CODI").
As tax advisor, I have a coast-to-coast practice helping people—just like you—avoid the often unanticipated and technically challenging laws about taxing cancellation of debt income. This income is reported to the IRS on Form 1099-C in January of the year following the creation (i.e., recognition) of CODI. The lender should mail to you the taxpayer's copy, and another copy is sent to the IRS.
For individuals, you report CODI as "Other income" on Form 1040 at line 21, listing the type as CODI (the amount to report is dealt with elsewhere). Sorry, the IRS will not allow you to use short forms 1040EZ or 1040A, because these don't have a line for reporting CODI! Businesses would report CODI as income on Schedule C, and real estate investors use Schedule E.
Every situation involving CODI has a story … excessive debt, forced sales, lost income, bad health and other personal tragedies, bad decisions, unexpected catastrophes, fraud, bankruptcy, horrible advice. CODI has been on the rise with the fallout from the economic downturn starting in 2007, and the extremely slow and uneven recovery since then. Its impact upon all of us is palpable. Instead of giving you a helpful break, the IRS gives you a swift kick you know where.
Why is CODI taxed at all? Well, go ask your congressman. The United States is the only country anywhere which taxes CODI! It's been on the books for some 80 years, starting with a series of narrow court decisions dealing with corporate debt. Over time, it has morphed into this monster which we have to deal with today.
But, huzzah, there is hope and good news for you! I've been able to reduce or completely eliminate today's impact of CODI for all of my clients. There are numerous exclusions, offsets, work-arounds and strategies. But each solution is unique, because your situation is unique.
I've organized this website to touch upon just about every aspect of CODI imaginable … from the basic to the ridiculously complex. (Please pardon the current website construction.) My goal is to help you understand what you've gotten yourself into, and, most importantly, how to get out of it reasonably unscathed.
From 2009 to date, I have saved my clients more than $1,250,000.00* in unnecessary income taxes by using statutory exclusions and other provisions of the tax code to offset the tax on cancellation of debt income. *(>$5,000,000 excluded or offset income @ 25% marginal tax rate.) This doesn't mean that I can solve every tax dilemma, but at least I think I correctly understand how to handle these complicated COD income tax problems.
Please, please contact me with questions and/or comments. Rest assured, I keep everything completely confidential, period. My staff and I want to help you. Call me, now. Or, use the fill-in form located at the top right panel. ---►
Now a word from our National Taxpayer Advocate:
Just great, Nina Olson, our National Taxpayer Advocate, emphasizing— again and again—that these laws, regulations and rulings concerning CODI are "complex." She lays out your options:
- try to figure it out yourself (good luck!), or
- go visit an IRS Taxpayer Assistance Center, and take a number, or
- call the IRS to be put on hold forever, or
- seek help from VITA, if available, or, if that fails, then
- contact the Taxpayer Advocate Service.
Or, as she recommends, "you might also consider seeking qualified professional help when facing this issue." Now that's good advice!
Where do you go from here?
IRS Form 1099s: What are these forms?
Canceled Debt: What is CODI? What isn't CODI?
Typical Situations: Examples of CODI.
Exclusions: How to exclude CODI.
Trade or business: How to offset CODI.
Form 982: When to use it, and, importantly, when not to.
Tax attributes: What you need to report to the IRS.
Reporting errors: How to deal with bad Form 1099s.
Contact Me: 4 ways to contact me … right now!
Please read this important information.
I publish and maintain this website for general information only, and not as tax or legal advice.
You never, never should act upon this information without first seeking professional counsel, as appropriate advice for you would depend upon the particular facts, circumstances and goals of your situation. Caveat lector.
This information is not intended to create, and your receipt of it does not constitute, an attorney-client relationship with me. I cannot, will not and do not represent you until my client intake process is completed.
I absolutely reserve the right to accept or decline representing any person or organization in any matter at any time.
Please do NOT send to me any confidential information about any matter until you receive a written statement from me advising you that I represent you (the "Engagement Letter"). Refer to the Terms and Conditions under the Contact heading, above.
*The laws governing legal advertising in various jurisdictions, including Ohio where I am licensed to practice law, may require the following statement:
THIS IS AN ADVERTISEMENT.
Got a question? I have the answer.
Please complete this form. I want to help you and will promptly respond, personally.
Submit your question, or call me now at (513) 739-7899.
Look, here's an offer you just shouldn't refuse. I will discuss your situation with you—confidentially and without charge—for an initial consultation. It's really that simple. You'll have no obligation to engage my services before, during or after your initial call.
I represent people just like you throughout the U.S. I'm confident you'll agree that I charge a reasonable fee for my professional services, custom tailored to meet your needs and budget.
David N. Stonehill, Attorney-at-law
Tax Advisor and Certified Divorce Financial Analyst®
Links & Resource Materials
1099advisor on the Radio
David Stonehill has been a frequent guest on radio talk shows.
Click on the link below, and theYahoo! Media Player will magically appear!
These are Dave's most recent appearances on Lewis Gatch's "Everybody's Planning Hour" radio show. Dave talks about what creates cancellation of debt income, why it's taxed, and how to avoid paying too much tax on it.
United States Tax Code
IRS Publication 525.
Taxable and Nontaxable Income
Revised December 31, 2013
IRS Publication 527.
Residential Rental Property (Including Rental of Vacation Homes)
Revised January 30, 2014
IRS Publication 544.
Sale and Other Dispositions of Assets
Revised January 30, 2014
IRS Publication 551.
Basis of Assets
Revised December 11, 2014
IRS Publication 925.
and At-Risk Rules
Revised January 23, 2014
IRS Publication 946.
How to Depreciate Property
Revised January 28, 2014