That's . . . Odd. I'm sure there are people trying to abuse the system that might be manipulating debt cancellation, but it seems fairly obvious that someone with a clear permanent disability isn't going to be getting rich on student debt cancellation.

I hope the IRS figures this out in a farming hurry.

SphericalTime: That's . . . Odd. I'm sure there are people trying to abuse the system that might be manipulating debt cancellation, but it seems fairly obvious that someone with a clear permanent disability isn't going to be getting rich on student debt cancellation.

I hope the IRS figures this out in a farming hurry.

Farking hurry, rather. Damned autocorrect.

I heard Chris Christie ate her lunch.

Oooooooooooooooooobama's fault.

bigpeeler: Oooooooooooooooooobama's fault.

FTA...In fact, the Department of the Treasury has specifically stated that student loans cancelled due to the Death and Disability Discharge (Section 437(a) of the Higher Education Act of 1965) are taxable.


It's true! President Obama time travelled back to when he was 4-years old and made discharged student loans taxable! The fiend!

Sure thing -- as soon as every other loan dismissal is subject to the same. What's that? It'll never happen? Great: Make this never happen again either.

Only in America can not seeing any actual income be taxed for income.

Meh, the country is broke, they are turning over every rock and squeezing every turnip.......except for the rich folk......

aybara: Only in America can not seeing any actual income be taxed for income.

It helps offset the loss of government revenue for income taxes on capital gains. See, then that money is put right back into the economy to create jobs. You've got to lose a pawn or two in the overall scheme of things.

I'd be remiss if I didn't note her delicious DSLs.

gameshowhost: Sure thing -- as soon as every other loan dismissal is subject to the same. What's that? It'll never happen?

Actually, I believe all canceled loans are treated as income.

aybara: Only in America can not seeing any actual income be taxed for income.


Debt cancellation is a taxable benefit, it always has been. Now, in this case the IRS should have a conversation with the ED and figure out what a Total and Permanent Disability actually is, and how unlikely they are to get this money. Blood from a stone and all that, but the concept isn't a bad one.

Not all cancelled student loan debt is taxable. If Thompson's debt had been forgiven because she worked in a job that qualified her to have some or all of her debt wiped out (certain medical, teaching or law enforcement positions, for example) she wouldn't now owe the IRS some $26,000.

Yeah...that's gonna change. I'd bet anything that by 2020, after the IRS has realized how much the Public Service Loan Forgiveness plan is going to cost, they'll start taxing the loan forgiveness.

Shostie: gameshowhost: Sure thing -- as soon as every other loan dismissal is subject to the same. What's that? It'll never happen?

Actually, I believe all canceled loans are treated as income.

Clarification per IRS.gov:

http://www.irs.gov/newsroom/article/0,,id=174034,00.html (new window)

2. Is Cancellation of Debt income always taxable?

Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:

Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.

Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you.You are insolvent when your total debts are more than the fair market value of your total assets.Insolvency can be fairly complex to determine and the assistance of a tax professional is recommended if you believe you qualify for this exception.

Certain farm debts:If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.The rules applicable to farmers are complex and the assistance of a tax professional is recommended if you believe you qualify for this exception.

Non-recourse loans:A non-recourse loan is a loan for which the lender's only remedy in case of default is to repossess the property being financed or used as collateral.That is, the lender cannot pursue you personally in case of default.Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income.However, it may result in other tax consequences, as discussed in Question 3 below.

Bankruptcy

Debt canceled in a title 11 bankruptcy case is not included in your income.

We let businesses off the hook, all the time.

gameshowhost: Bankruptcy

Debt canceled in a title 11 bankruptcy case is not included in your income.

We let businesses off the hook, all the time.

Well, duh

/we have to look out for the campaign contributors job creators

MaudlinMutantMollusk: gameshowhost: Bankruptcy

Debt canceled in a title 11 bankruptcy case is not included in your income.

We let businesses off the hook, all the time.

Well, duh

/we have to look out for the campaign contributors job creators

Chapter 11 bankruptcy is also available to individuals.

Just sayin'.

You borrow money. You pay taxes.

Shostie: MaudlinMutantMollusk: gameshowhost: Bankruptcy

Debt canceled in a title 11 bankruptcy case is not included in your income.

We let businesses off the hook, all the time.

Well, duh

/we have to look out for the campaign contributors job creators

Chapter 11 bankruptcy is also available to individuals.

Just sayin'.

I was going for the joke

/went through chapter 11

Shostie: MaudlinMutantMollusk: gameshowhost: Bankruptcy

Debt canceled in a title 11 bankruptcy case is not included in your income.

We let businesses off the hook, all the time.

Well, duh

/we have to look out for the campaign contributors job creators

Chapter 11 bankruptcy is also available to individuals.

Just sayin'.

I know, I know.

TheDumbBlonde: You borrow money. You pay taxes.

That doesn't seem to be the principle. Try again.

Let me to repeat: You borrow money..you pay taxes.

TheDumbBlonde: Let me to repeat: You borrow money..you pay taxes.

So that's how mortgage deductions work?

TheDumbBlonde: Let me to repeat: You borrow money..you pay taxes.

So...just like in no other situation whatsoever?

MaudlinMutantMollusk: TheDumbBlonde: Let me to repeat: You borrow money..you pay taxes.

So that's how mortgage deductions work?

Tax deductions have zero to due with forgiven debt. Ergo: tax due. Is life as a genius difficult?

TheDumbBlonde: MaudlinMutantMollusk: TheDumbBlonde: Let me to repeat: You borrow money..you pay taxes.

So that's how mortgage deductions work?

Tax deductions have zero to due with forgiven debt. Ergo: tax due. Is life as a genius difficult?

It was an honest question. A mortgage is borrowed money, yet it's usually a deduction on your taxes. I'm neither a genius nor a tax accountant, and apparently, you aren't either

Next up, that shirt you bought for $19.99 that was 50% off? You owe taxes on your windfall.

MaudlinMutantMollusk: TheDumbBlonde: MaudlinMutantMollusk: TheDumbBlonde: Let me to repeat: You borrow money..you pay taxes.

So that's how mortgage deductions work?

Tax deductions have zero to due with forgiven debt. Ergo: tax due. Is life as a genius difficult?

It was an honest question. A mortgage is borrowed money, yet it's usually a deduction on your taxes. I'm neither a genius nor a tax accountant, and apparently, you aren't either

Yes, a mortgage is borrowed money, but you get a deduction on qualifies payments on mortgage interests. This, on the other hand, is extinguishment of a debt, which has always, as a general rule, been considered taxable income by the IRS. If your bank called tomorrow and told you they were canceling the last $91,000 due on your mortgage and you didn't have to pay it, you would have to claim that as income on your tax return and you would owe taxes on that $91k.

MaudlinMutantMollusk: TheDumbBlonde: MaudlinMutantMollusk: TheDumbBlonde: Let me to repeat: You borrow money..you pay taxes.

So that's how mortgage deductions work?

Tax deductions have zero to due with forgiven debt. Ergo: tax due. Is life as a genius difficult?

It was an honest question. A mortgage is borrowed money, yet it's usually a deduction on your taxes. I'm neither a genius nor a tax accountant, and apparently, you aren't either

According to the current tax law your INTEREST on your real property primary residence IS deductible. It's obvious you are not an accountant, but I will let you prove your lack of genius at your leisure.

Nabb1:
Yes, a mortgage is borrowed money, but you get a deduction on qualifies payments on mortgage interests. This, on the other hand, is extinguishment of a debt, which has always, as a general rule, been considered taxable income by the IRS. If your bank called tomorrow and told you they were canceling the last $91,000 due on your mortgage and you didn't have to pay it, you would have to claim that as income on your tax return and you would owe taxes on that $91k.

Thanks. That makes more sense

/never bought a house

dahmers love zombie: TheDumbBlonde: Let me to repeat: You borrow money..you pay taxes.

So...just like in no other situation whatsoever?

*still waiting on that one*

gameshowhost: dahmers love zombie: TheDumbBlonde: Let me to repeat: You borrow money..you pay taxes.

So...just like in no other situation whatsoever?

*still waiting on that one*

Patience. She's got a tee time at Augusta. Priorities...

djkutch: gameshowhost: dahmers love zombie: TheDumbBlonde: Let me to repeat: You borrow money..you pay taxes.

So...just like in no other situation whatsoever?

*still waiting on that one*

Patience. She's got a tee time at Augusta. Priorities...

I suppose. Now I feel bad.

cryinoutloud: What are they going to do, garnish her disability payments?

/don't answer that.

Very likely, she'll apply for an Offer in Compromise with the IRS for a lesser amount. If she's lucky, the IRS will accept it and they'll move on.

Man, the Dept. of Education has been really bad at communication and explaining things lately. I applied for that special loan consolidation, with the understanding that they would check in with me if it was approved but before it happened to make sure I was chill with it. I wanted to look it over before giving it the final go-ahead to make sure it wouldn't fark up interest rates or some of my loans that don't earn interest, and to make sure my payments wouldn't go up.

I got a letter last week from Nelnet saying "Yay, you were approved and we consolidated your shiat!" Now I'm having to deal with them over it because a loan is earning interest that shouldn't be. Bah.

WhyteRaven74: moviemarketing: Hate to stick up for the IRS, and I'm not saying it's income, but...it is definitely income.

It's a very odd definition of income to say that discharged debt, after all the money has been spent, all of a sudden counts as income.

The interesting conundrum is that a person can keep an entire home (and other stuff) as the result of a bankruptcy, but once you add in the dismissal of student loan debt then the full-blown net-asset solvency test is applied.

Make poor decisions? No problem. Go bankrupt and we won't curse you to a doomed existence. You still got the house, a so-so car and some other stuff.

Become permanently disabled? Let's figure out a way to make your life as miserable as possible. DIAF, stupid cripple.

/makes no sense that shiatty luck is penalized more than is shiatty decision making

Shostie: Very likely, she'll apply for an Offer in Compromise with the IRS for a lesser amount. If she's lucky, the IRS will accept it and they'll move on.

And then she'll get a letter from the IRS regarding the taxes she got discharged.