1040-US: Amending a return because previously canceled debt was repaid and included in income

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Question

What do I do if my client repaid a previously canceled debt that was included in income?

Answer

If canceled debt is included in income and then later repaid, Form 1040X must be filed for the year the income was reported. Form 1040X can be filed only if the statute of limitations is still open, which is generally three years after the due date of the original return.

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