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Received 1099c for s-corp for debt that was discharged by personal bk. Does my bk exempt me from paying taxes on the income?

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The 1099c allows the income to be excluded by filing form 982 with a bankruptcy or insolvency exception. Because I have an s-corp the income will go directly to me personally to pay tax on. Since this debt was discharge through my personal bankruptcy, I should not be responsible for the tax on the cancelled debt. On the 1099c it states "BUSINESS BANKRUPTCY DISCHARGED DEBT" "BORROWER WAS PERSONALLY LIABLE FOR REPAYMENT OF DEBT".

3 Attorney Answers

If you filed a personal Ch7, the this debt has been discharged and you should include a form 982 with your personal income tax filing.
You should consult both with your attorney for the bankruptcy and your tax professional.
Yes. I agree with Attorney Caldwell. If you filed a personal Chapter 7, the debt was discharged and you should include a form 982 with your personal income tax filing.
For more information on debt forgiveness, 1099-A, and 1099-C, see:
http://www.irs.gov/instructions/i1099ac/ar02.html
There is also an IRS Publication 4681:
http://www.irs.gov/pub/irs-pdf/p4681.pdf
Since the S-Corp is a pass through entity for taxation, your bankruptcy discharges your personal liability on the debt and the 982 on with your 1040 will clear that up.

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