Skills Warm Up: Cancellation of Debt—Nonbusiness Credit Card Debt
Question 3 of 3
Review the information again about Kay's canceled debt.
Kay was released from her obligation to pay personal credit card debt. She owed $10,000 to her credit card company, which agreed to accept $2,500 as payment in full. Before paying the credit card company, it was determined Kay was solvent (assets greater than liabilities) and not in bankruptcy. The credit card company issued Kay a Form 1099-C, reporting $7,500.
If the VITA/TCE site is able to assist Kay, what amount would be reported on Kay's Form 1040?