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Old 03-25-2013, 12:56 PM
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Credit Card Debt Cancellation and LLC

A client has $55,000 of credit card debt cancellation. She is not insolvent, did not file bankrupcy, nor was there a foreclosure. She was a partnership LLC with her husband in CA, disolved the partnership 3 years ago, however kept the employer ID to file the yearly LLC form as a sole proprietor. The 1099-C forms were reported on the LLC employer id number, not her social security number. The "corporate turnaround" company she used says she does not need to pay taxes on this. I am an EA, and my position is....she was not a corporation! Whether this was reported on the LLC number or not. I'm Stumped. I Think I need to report it on Schedule C, subject to SE tax as well. She is not insolvent however very close so that won't help her. Because they liquidated most of their retirement savings, the tax rate is high & she now owes over 50% of what she saved. I'm trying to Help her. Can someone help me. If there is a direction I can take to at least consider this personal credit card debt and not business debt it would help. Thank you very much in advance. btw, the biggest stump to me right now is the use of the LLC employer ID number. I don't think that lets her off the hook personally................ :-(



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