![]() ![]() Virginia fully conforms to the federal exemption from taxation of CODI attributable to insolvency, bankruptcy, or the Mortgage Debt Relief Act of 2007. In the case of individuals, if the CODI arose from the taxpayer's principal residence the taxpayer may qualify for exemption under the Mortgage Debt Relief Act of 2007. Although the creditor will issue a Form 1099 reporting the amount of debt forgiven in the transaction, there are several exceptions that exempt the CODI from taxation, such as the debtor being insolvent or bankrupt. ![]() For details on these exceptions, see Tax Bulletin 21-4.Ĭlarification on Cancellation of Debt IncomeĬancellation of debt income ("CODI") arises when a creditor forgives all or any portion of a debt, such as when a bank agrees to a short sale in lieu of foreclosure. Under emergency legislation passed by the General Assembly and signed by Governor Northam, Virginia's conformity to the terms of the Internal Revenue Code will advance to December 31, 2020, with certain exceptions. Beginning in 2002, each session of the Virginia General Assembly has fixed a date of conformity with the Internal Revenue Code. Whenever federal income tax law changed, the changes automatically affected Virginia income taxes, unless otherwise exempt. Since 1972, Virginia has conformed to federal income tax law. ![]()
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