Question

Marvin received Form 1099-C reporting canceled credit debt of $7,000. His total liabilities immediately before the cancellation were $43,000. The FMV of assets immediately before the cancellation were $38,000. What amount of canceled debt will Marvin report on his return?a. $0b. $2,000 c. $5,000

Answer 1

Answer:

b. $2,000

Explanation:

Marvin liability immediately before the cancellation=$43,000

Marvin FMV of assets immediately before the cancellation=$38,000

Difference between two liability and assets=43,000-38,000

                                                                        =$5,000

Form 1099-C canceled credit debit=$7,000

Amount of canceled debt that marvin will report=7,000-5,000

                                                                                =$2,000

So the answer shall be b. $2,000