Answer: $10,000
Explanation:
When a Creditor relies a debtor of the obligation to pay back a debt (Debt cancellation), this is treated as income.
This income is quite taxable and must be reported on the Tax return of the year that it was forgiven.
Marie should therefore report the entire amount forgiven which was the whole amount of $10,000 in her Tax return for 2019 even though she has received no income from it.
Answer:
Marie must record the $10,000 an ordinary income in the year the debt was forgiven.
Explanation:
A debt cancelled or forgiven is treated as an additional income of the debtor in the year such forgiveness is granted by the creditor to the debtor.
It is expected that the creditor would furnish the debtor with Form 1099-C ,cancellation of debt,which shows clearly the amount of debt forgiven, the date of such forgiveness as well as the name of the beneficiary of such debt cancellation.
The onus is on the debtor to ensure that the details so provided were accurate, otherwise contacting the creditor so as to make necessary corrections would be expedient.
