At the end of this learning experience you will be able to explain to your clients the proper tax treatments for foreclosures and canceled debt related to their principal residence business propert ID: 836397
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1 Common Foreclosure & Cancellation of Deb
Common Foreclosure & Cancellation of Debt Issues for Real Property At the end of this learning experience, you will be able to explain to your clien
2 ts the proper tax treatments for foreclo
ts the proper tax treatments for foreclosures and canceled debt related to their principal residence, business property, and investment property.
3 OverviewReview common termsDefine cancel
OverviewReview common termsDefine cancellation of debt incomeExplain nonrecourse and recourse debtIRC Section 108, income exclusionsTax treatment Pr
4 incipal residence, business, and investm
incipal residence, business, and investmentOverview nonrecourse/antideficiency state laws TermsForeclosuresShort salesDeed in lieu of foreclosureAba
5 ndonment Cancellation of Debt Income (CO
ndonment Cancellation of Debt Income (CODI)Gross income includes income from cancellation of debt 61(a)(12)Where to report CODIExceptions Cancellati
6 on of Debt Income (CODI) ContinuedExclus
on of Debt Income (CODI) ContinuedExclusions BankruptcyInsolvencyQualified Farm IndebtednessQualified Real Property Business IndebtednessQualified P
7 rincipal Residence Indebtedness Nonrecou
rincipal Residence Indebtedness Nonrecourse Debt Debtor NOT personally responsible to repay Loan secured only by the propertyGain or loss: Great
8 er of debt balance or fair market value
er of debt balance or fair market value Less the adjusted basisGenerally no cancellation of debt income Debtor personally responsible to repay the l
9 oanCODI: debt balance less FMVGain/Loss:
oanCODI: debt balance less FMVGain/Loss: lesser of FMV or debt balance less the adjusted basis Form 1099- Form 1099- Potential Timing Differences
10 49; Nonrecourse Loan Report sale: Year
49; Nonrecourse Loan Report sale: Year of foreclosure or abandonment Recourse Loan – Report sale: Year of foreclosure sale Exclusions from In
11 come IRC BankruptcyInsolvencyQualified f
come IRC BankruptcyInsolvencyQualified farm indebtednessQualified real property business indebtednessQualified principal residence indebtedness Tax
12 AttributesCODI excluded from gross incom
AttributesCODI excluded from gross incomeBankruptcy, Insolvency & Farm exclusionsQualified real property business exclusionQualified principal resid
13 ence exclusion Principal ResidenceTax T
ence exclusion Principal ResidenceTax TreatmentQualified principal residence indebtedness exclusionForm 982 Part I and Part IILoan modification red
14 uce basisReport foreclosure on Form 8949
uce basisReport foreclosure on Form 8949 Schedule D Business Property Tax TreatmentForm 982 Part I and Part IIBankruptcyInsolvencyFarmQualified real
15 property businessForeclosure Form 4797
property businessForeclosure Form 4797 Investment PropertyForm 982 Part I and Part IIBankruptcyInsolvencyForeclosure Form 8949 Schedule D Debt bala
16 nce $180,000
nce $180,000 FMV of personal residence (170,000) Ordinary CODI 10,000 FMV of personal residence $170,000
17 Adjusted basis 200,000)
Adjusted basis 200,000) Nondeductible loss on ($30,000)foreclosure Nonrecourse / AntiDeficiency StatesState law gove
18 rns type of loanDifferent lawsAll loans
rns type of loanDifferent lawsAll loans are NOT nonrecourse IRS.gov ResourcesReal Estate Tax CenterReal Estate Foreclosure and COD ATGPublication 46
19 81, Canceled Debts, Foreclosures, Reposs
81, Canceled Debts, Foreclosures, Repossessions, and AbandonmentsPublication 544, Sales and Other Dispositions of Assets Telephone Assistance for In
20 dividuals:TollFree, 8008291040Telephone
dividuals:TollFree, 8008291040Telephone Assistance for Businesses:TollFree, 8008294933 Hot Topics on IRS.govSearch Word(s)Affordable Care ActACAAnnu
21 al Filing Season ProgramFiling season pr
al Filing Season ProgramFiling season programContinuingeducation for tax prostax prosServices online tax toolseserviceIdentity theftID theftPractiti
22 oner events on IRS.govPractitioner event
oner events on IRS.govPractitioner eventsTangible Property RegulationsTangibleThird party reporting information centerThird partySB/SE Tax CalendarT