KW is a married, real estate developer that was looking at over $675,000 in income taxes on the cancellation of indebtedness associated with the abandonment of various real estate properties that received various 1099-COD or 1099-SA tax forms for 2009.
Recent enacted tax legislation provided economic relief where a taxpayer can attribute the debt cancellation to his primary residence, or in his case where the taxpayer meets the insolvency exception thereby allowing the debt to be cancelled without incurring the income taxes normally associated with the debt cancellation.
KW sought the advice of a bankruptcy attorney who correctly advised his client to seek the advice of his accountants. Through carefully calculating his economic position and completing the appropriate disclosures, KW was able to avoid what would otherwise have been taxable to him and obtain a $37,000 refund on all amounts withheld throughout the tax year. Total professional fees approximated $1,500.