My Life. My Card. My Income.

The Tax Court today decided Martins v. Commissioner, T.C. Summary Opinion 2006-43 (3/22/06), which explains the tax consequences of failing to pay off credit card debts.  Mr. Martins was unable to pay the $21,800 he owed to American Express, which hired a collection agency to help it collect payment.  Mr. Martins eventually paid $15,000, and American Express released him from the remaining $6,800.  Result:  $6,800 of discharge of indebtedness income under section 61(a)(12).