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Voluntary lien releases by junior lienholders during Chapter 13
Dear Group,
A lien release with claim reserved is not a debt forgiveness.
I would argue (and have done so many times) that a lien release in BK is not
taxable income for one of three separate grounds: (1) if it's the principal
residence, it's not taxable income (but CA has a $800k limit); (2) not
income to the extent debtor is insolvent; or (3) discharge related to a
title 11 (BK) proceeding. You file the form 982 with your 1040 and check
the applicable box(es).
Gerry
Gerald McNally
McNally & Associates, P.C.
517 East Wilson Ave., Ste 104
Glendale, CA 91206
818.507.5100
Fax: 818.507.5001
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