What is Cancellation of Debt?

Because of the current mortgage foreclosure crisis, many people are concerned about the issue of forgiven debt and receiving a Form 1099.  Below is an explanation of what is cancelled debt directly from the IRS website:

If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is normally reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.
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Child Support

The right to receive child support may not be waived by the parents, and both parents share an equal duty to support their children in proportion to their ability to pay.  Minimum payments are calculated in accordance with statutory guidelines.  However, the court may order less than the minimum award if extraordinary medical or educational expenses exist, there is seasonal variation in income, the child’s age warrants deviation, or there is an IRS dependency exception.

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