Legislative Authority2 Internal Revenue Code IRC section 61a12 Gross income includes 147income from discharge of indebtedness148 CODI Amount realized smaller of fair Discharge of r ID: 836396
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1 Debt Income – What Legislative Aut
Debt Income – What Legislative Authority Internal Revenue Code (IRC) section 61(a)(12): Gross income includ
2 es “income from discharge of indebt
es “income from discharge of indebtedness.” CODI. Amount realized: smaller of fair Discharge of recourse d
3 ebt in a loan no CODI. Amount realized
ebt in a loan no CODI. Amount realized is the full modification: CODI can arise. See Revenue Exclusions – Tax-
4 Deferred Qualified real property busines
Deferred Qualified real property business Discharge of certain indebtedness because Exclusions – Tax-Deferred B
5 ankruptcy Insolvency Qualified principal
ankruptcy Insolvency Qualified principal residence indebtedness Insolvency calculation: -FMV of total assets* before
6 the discharge The Mortgage Forgiveness
the discharge The Mortgage Forgiveness Debt Relief Act of 2007 (MFDRA) • Created a new exclusion under
7 IRC sections 108(a)(1)(E) and 108(h) fo
IRC sections 108(a)(1)(E) and 108(h) for discharged qualified principal residence indebtedness. • Applies to in
8 debtedness that is discharged on or afte
debtedness that is discharged on or after Jan. 1, 2007, and before Jan. 1, 2013. Applies to acquisition inde
9 btedness (as “Principal residence&#
btedness (as “Principal residence” as defined in IRC section 121 (The 5-year look-back test is proceeds of
10 a “home equity” loan used to
a “home equity” loan used to Does NOT include a “home equity” loan Begins – Form 1099-C Ta
11 xpayer Reporting of Form 1099-C Inco
xpayer Reporting of Form 1099-C Income • Taxpayers must report all Form 1099-C income on their returns.
12 • Taxpayers may be able to exclude
• Taxpayers may be able to exclude part or all of the Form 1099-C income by completing Reduction of Tax Attribut