Answer to last week's poll question.

You receive a Form 1099-C in the mail. This means you

A.) had commission income.
B.) donated money to charity.
C.) had a cancellation of debt.
D.) are about to receive the mother of all tax audits.

The correct answer is C.) had a cancellation of debt. A cancellation, or forgiveness, of debt occurs in several instances where you might have a credit card balance cancelled, restructure your mortgage or sell your home for less than it's worth. Normally, this is considered taxable income and is reported on Form 1040, line 21 "Other Income". Recent enactments in the Bailout Bill state that in 2009, restructuring you mortgage or selling your home for less than it's worth will not generate a Form 1099-C.