Here’s another fun way the gov’t “helps.” Say you owe $15k on a credit card debt. If you negotiate and settle the account for $10k, the gov’t says “Hmm, you just made $5k in income, please send me a third.”
huh? that’s sick.
-but if you shop a sale and get an extra discount for using the same credit card...they don’t. govt is intruding too much here.
That pisses me off to no end. We had that very scenario hit us in the butt a few years ago when MrsVRWC's employer was bought out by a company that moved all the business accounts out of state and shut down the local business unit. We took the severence package cashout and negotiated down some balances to pay them off. The write-downs were counted as "income" for that tax year, but did we ever get to deduct any of the thousands of dollars in interest that we paid on those accounts over the years? NO. By the same token, we should be able to write off any increase in debt as a "losses". That is one of the biggest pieces of b*ll$#!+ in the tax code that I have come across (and that is really saying something)!