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2011 Tax Forms 1040

2011 Federal Tax FormsState Income TaxAmending A Tax ReturnAmend 2011 Tax Return OnlineFiling Past Years TaxesAmending A State Tax ReturnHow To File Tax Amendment OnlineAmendment To Tax Return 20132011 Tax Tables FederalCorporation Tax SoftwareFile 1040ez ElectronicallyFree Prior Year Tax Filing FreeBlank 1040ez FormHow To Amend Tax Return 2012State Tax ReturnsNeed To Amend 2010 Tax ReturnFederal Income Tax Forms 2011Tax Preparation For MilitaryWww Irs Gov Form1040xFree Tax Filing For College Students1040 Ez Tax FormsIrs Mailing Address 1040ezFiling An Amended Tax Return For 2010How To Amend 2009 Tax Return2014 Federal Tax Form 1040ezHr Block Free State File1040ezformHow Do I Amend My 2012 Tax Return1040x TurbotaxFile My 2010 Taxes FreeHow Do You File A Tax AmendmentEfile 1040nr Ez 540nr ShortFree State Income Tax1040x Form 20131040ez HelpCan I Refile My TaxesFree Tax 2011Turbotax 2011 EditionIrs Free Tax File2012 Ez Form

2011 Tax Forms 1040

2011 tax forms 1040 Publication 544 - Additional Material Table of Contents Tax Publications for Business TaxpayersSee How To Get Tax Help for a variety of ways to get publications, including by computer, phone, and mail. 2011 tax forms 1040 General Guides 1 Your Rights as a Taxpayer 17 Your Federal Income Tax (For Individuals) 334 Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) 509 Tax Calendars 910 IRS Guide to Free Tax Services Employer's Guides 15 (Circular E), Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits 51 (Circular A), Agricultural Employer's Tax Guide 80 (Circular SS), Federal Tax Guide For Employers in the U. 2011 tax forms 1040 S. 2011 tax forms 1040 Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands 926 Household Employer's Tax Guide Specialized Publications 225 Farmer's Tax Guide 463 Travel, Entertainment, Gift, and Car Expenses 505 Tax Withholding and Estimated Tax 510 Excise Taxes (Including Fuel Tax Credits and Refunds) 515 Withholding of Tax on Nonresident Aliens and Foreign Entities 517 Social Security and Other Information for Members of the Clergy and Religious Workers 527 Residential Rental Property 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 537 Installment Sales 538 Accounting Periods and Methods 541 Partnerships 542 Corporations 544 Sales and Other Dispositions of Assets 551 Basis of Assets 556 Examination of Returns, Appeal Rights, and Claims for Refund 560 Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) 561 Determining the Value of Donated Property 583 Starting a Business and Keeping Records 587 Business Use of Your Home (Including Use by Daycare Providers) 594 What You Should Know About The IRS Collection Process 595 Capital Construction Fund for Commercial Fishermen 597 Information on the United States-Canada Income Tax Treaty 598 Tax on Unrelated Business Income of Exempt Organizations 686 Certification for Reduced Tax Rates in Tax Treaty Countries 901 U. 2011 tax forms 1040 S. 2011 tax forms 1040 Tax Treaties 908 Bankruptcy Tax Guide 925 Passive Activity and At-Risk Rules 946 How To Depreciate Property 947 Practice Before the IRS and Power of Attorney 1544 Reporting Cash Payments of Over $10,000 (Received in a Trade or Business) 1546 Taxpayer Advocate Service - Your Voice at the IRS Spanish Language Publications 1SP Derechos del Contribuyente 179 (Circular PR), Guía Contributiva Federal Para Patronos Puertorriqueños 579SP Cómo Preparar la Declaración de Impuesto Federal 594SP Qué es lo Debemos Saber Sobre El Proceso de Cobro del IRS 850 English-Spanish Glossary of Words and Phrases Used in Publications Issued by the Internal Revenue Service 1544SP Informe de Pagos en Efectivo en Exceso de $10,000 (Recibidos en una Ocupación o Negocio) Commonly Used Tax FormsSee How To Get Tax Help for a variety of ways to get forms, including by computer, phone, and mail. 2011 tax forms 1040 Form Number and Form Title W-2 Wage and Tax Statement W-4 Employee's Withholding Allowance Certificate 940 Employer's Annual Federal Unemployment (FUTA) Tax Return 941 Employer's QUARTERLY Federal Tax Return 944 Employer's ANNUAL Federal Tax Return 1040 U. 2011 tax forms 1040 S. 2011 tax forms 1040 Individual Income Tax Return Sch. 2011 tax forms 1040 A & B Itemized Deductions & Interest and Ordinary Dividends Sch. 2011 tax forms 1040 C Profit or Loss From Business Sch. 2011 tax forms 1040 C-EZ Net Profit From Business Sch. 2011 tax forms 1040 D Capital Gains and Losses Sch. 2011 tax forms 1040 E Supplemental Income and Loss Sch. 2011 tax forms 1040 F Profit or Loss From Farming Sch. 2011 tax forms 1040 H Household Employment Taxes Sch. 2011 tax forms 1040 J Income Averaging for Farmers and Fishermen Sch. 2011 tax forms 1040 R Credit for the Elderly or the Disabled Sch. 2011 tax forms 1040 SE Self-Employment Tax 1040-ES Estimated Tax for Individuals 1040X Amended U. 2011 tax forms 1040 S. 2011 tax forms 1040 Individual Income Tax Return 1065 U. 2011 tax forms 1040 S. 2011 tax forms 1040 Return of Partnership Income Sch. 2011 tax forms 1040 D Capital Gains and Losses Sch. 2011 tax forms 1040 K-1 Partner's Share of Income, Deductions, Credits, etc. 2011 tax forms 1040 1120 U. 2011 tax forms 1040 S. 2011 tax forms 1040 Corporation Income Tax Return Sch. 2011 tax forms 1040 D Capital Gains and Losses 1120S U. 2011 tax forms 1040 S. 2011 tax forms 1040 Income Tax Return for an S Corporation Sch. 2011 tax forms 1040 D Capital Gains and Losses and Built-In Gains Sch. 2011 tax forms 1040 K-1 Shareholder's Share of Income, Deductions, Credits, etc. 2011 tax forms 1040 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 2210 Underpayment of Estimated Tax by Individuals, Estates, and Trusts 2441 Child and Dependent Care Expenses 2848 Power of Attorney and Declaration of Representative 3800 General Business Credit 3903 Moving Expenses 4562 Depreciation and Amortization 4797 Sales of Business Property 4868 Application for Automatic Extension of Time To File U. 2011 tax forms 1040 S. 2011 tax forms 1040 Individual Income Tax Return 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts 6252 Installment Sale Income 7004 Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns 8283 Noncash Charitable Contributions 8300 Report of Cash Payments Over $10,000 Received in a Trade or Business 8582 Passive Activity Loss Limitations 8606 Nondeductible IRAs 8822 Change of Address 8829 Expenses for Business Use of Your Home 8949 Sales and Other Dispositions of Capital Assets Prev  Up  Next   Home   More Online Publications
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The African Development Foundation provides grants to community groups and small enterprises that benefit under-served and marginalized groups in Africa.

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The 2011 Tax Forms 1040

2011 tax forms 1040 4. 2011 tax forms 1040   Detailed Examples Table of Contents These examples use actual forms to help you prepare your income tax return. 2011 tax forms 1040 However, the information shown on the filled-in forms is not from any actual person or scenario. 2011 tax forms 1040 Example 1—Mortgage loan modification. 2011 tax forms 1040    In 2007, Nancy Oak bought a main home for $435,000. 2011 tax forms 1040 Nancy took out a $420,000 mortgage loan to buy the home and made a down payment of $15,000. 2011 tax forms 1040 The loan was secured by the home. 2011 tax forms 1040 The mortgage loan was a recourse debt, meaning that Nancy was personally liable for the debt. 2011 tax forms 1040 In 2008, Nancy took out a second mortgage loan (also a recourse debt) in the amount of $30,000 that was used to substantially improve her kitchen. 2011 tax forms 1040    In 2011, when the outstanding principal of the first and second mortgage loans was $440,000, Nancy refinanced the two recourse loans into one recourse loan in the amount of $475,000. 2011 tax forms 1040 The FMV of Nancy's home at the time of the refinancing was $500,000. 2011 tax forms 1040 Nancy used the additional $35,000 debt ($475,000 new mortgage loan minus $440,000 outstanding principal of Nancy's first and second mortgage loans immediately before the refinancing) to pay off personal credit cards and to pay college tuition for her son. 2011 tax forms 1040 After the refinancing, Nancy has qualified principal residence indebtedness in the amount of $440,000 because the refinanced debt is qualified principal residence indebtedness only to the extent the amount of debt is not more than the old mortgage principal just before the refinancing. 2011 tax forms 1040   In 2013, Nancy was unable to make her mortgage loan payments. 2011 tax forms 1040 On August 31, 2013, when the outstanding balance of her refinanced mortgage loan was still $475,000 and the FMV of the property was $425,000, Nancy's bank agreed to a loan modification (a “workout”) that resulted in a $40,000 reduction in the principal balance of her loan. 2011 tax forms 1040 Nancy was neither insolvent nor in bankruptcy at the time of the loan modification. 2011 tax forms 1040   Nancy received a 2013 Form 1099-C from her bank in January 2014 showing canceled debt of $40,000 in box 2. 2011 tax forms 1040 Identifiable event code "F" appears in box 6. 2011 tax forms 1040 This box shows the reason the creditor has filed Form 1099-C. 2011 tax forms 1040 To determine if she must include the canceled debt in her income, Nancy must determine whether she meets any of the exceptions or exclusions that apply to canceled debts. 2011 tax forms 1040 Nancy determines that the only exception or exclusion that applies to her is the qualified principal residence indebtedness exclusion. 2011 tax forms 1040   Next, Nancy determines the amount, if any, of the $40,000 of canceled debt that was qualified principal residence indebtedness. 2011 tax forms 1040 Although Nancy has $440,000 of qualified principal residence indebtedness, part of her loan ($35,000) was not qualified principal residence indebtedness because it was used to pay off personal credit cards and college tuition for her son. 2011 tax forms 1040 Applying the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent the amount canceled is more than the amount of the debt (immediately before the cancellation) that is not qualified principal residence indebtedness. 2011 tax forms 1040 Thus, Nancy can exclude only $5,000 of the canceled debt as qualified principal residence indebtedness ($40,000 amount canceled minus $35,000 nonqualified debt). 2011 tax forms 1040   Because Nancy does not meet any other exception or exclusion, she checks only the box on line 1e of Form 982 and enters $5,000 on line 2. 2011 tax forms 1040 Nancy must also enter $5,000 on line 10b and reduce the basis of her main home by the $5,000 she excluded from income, bringing the adjusted basis in her home to $460,000 ($435,000 purchase price plus $30,000 substantial improvement minus $5,000). 2011 tax forms 1040 Nancy must also include the $35,000 nonqualified debt portion in income on Form 1040, line 21. 2011 tax forms 1040 You can see Nancy's Form 1099-C and a portion of her Form 1040 below. 2011 tax forms 1040 Nancy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. 2011 tax forms 1040 Please click the link to view the image. 2011 tax forms 1040 Form 1099-C, Cancellation of Debt Nancy's 2013 Form 1040 This image is too large to be displayed in the current screen. 2011 tax forms 1040 Please click the link to view the image. 2011 tax forms 1040 Form 1040, U. 2011 tax forms 1040 S. 2011 tax forms 1040 Individual Income Tax Nancy's Form 982 This image is too large to be displayed in the current screen. 2011 tax forms 1040 Please click the link to view the image. 2011 tax forms 1040 Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)              Example 2—Mortgage loan foreclosure. 2011 tax forms 1040    In 2005, John and Mary Elm bought a main home for $335,000. 2011 tax forms 1040 John and Mary took out a $320,000 mortgage loan to buy the home and made a down payment of $15,000. 2011 tax forms 1040 The loan was secured by the home and is a recourse debt, meaning John and Mary are personally liable for the debt. 2011 tax forms 1040   John and Mary became unable to make their mortgage loan payments and on March 1, 2013, when the outstanding balance of the mortgage loan was $315,000 and the FMV of the property was $290,000, the bank foreclosed on the property and simultaneously canceled the remaining mortgage debt. 2011 tax forms 1040 Immediately before the foreclosure, John and Mary's only other assets and liabilities were a checking account with a balance of $6,000, retirement savings of $13,000, and credit card debt of $5,500. 2011 tax forms 1040   John and Mary received a 2013 Form 1099-C showing canceled debt of $25,000 in box 2 ($315,000 outstanding balance minus $290,000 FMV) and an FMV of $290,000 in box 7. 2011 tax forms 1040 Identifiable event code "D" appears in box 6. 2011 tax forms 1040 This box shows the reason the creditor has filed Form 1099-C. 2011 tax forms 1040 In order to determine if John and Mary must include the canceled debt in income, they must first determine whether they meet any of the exceptions or exclusions that apply to canceled debts. 2011 tax forms 1040 In this example, John and Mary meet both the insolvency and qualified principal residence indebtedness exclusions. 2011 tax forms 1040 Their sample Form 1099-C is shown on this page. 2011 tax forms 1040   John and Mary complete the insolvency worksheet and determine that they were insolvent immediately before the cancellation because at that time their liabilities exceeded the FMV of their assets by $11,500 ($320,500 total liabilities minus $309,000 FMV of total assets). 2011 tax forms 1040 However, because the entire debt canceled is qualified principal residence indebtedness, the insolvency exclusion only applies if John and Mary elect to apply the insolvency exclusion instead of the qualified principal residence exclusion. 2011 tax forms 1040   John and Mary do not elect to apply the insolvency exclusion instead of the qualified principal residence exclusion because under the insolvency exclusion their exclusion would be limited to the amount by which they were insolvent ($11,500). 2011 tax forms 1040 Instead, John and Mary check box 1e of Form 982 to exclude the canceled debt under the qualified principal residence exclusion. 2011 tax forms 1040 Under the qualified principal residence exclusion, the amount that John and Mary can exclude is not limited because their qualified principal residence indebtedness is not more than $2 million and no portion of the loan was nonqualified debt. 2011 tax forms 1040 As a result, John and Mary enter the full $25,000 of canceled debt on line 2 of Form 982. 2011 tax forms 1040 Because John and Mary no longer own the home due to the foreclosure, John and Mary have no remaining basis in the home at the time of the debt cancellation. 2011 tax forms 1040 Thus, John and Mary leave line 10b of Form 982 blank. 2011 tax forms 1040   John and Mary must also determine whether they have a gain or loss from the foreclosure. 2011 tax forms 1040 John and Mary complete Table 1-1 (shown below) and find that they have a $45,000 loss from the foreclosure. 2011 tax forms 1040 Because this loss relates to their home, it is a nondeductible loss. 2011 tax forms 1040   John and Mary's Form 1099-C, Insolvency Worksheet, and Form 982 follow. 2011 tax forms 1040 John and Mary's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. 2011 tax forms 1040 Please click the link to view the image. 2011 tax forms 1040 Form 1099-C, Cancellation of Debt Table 1-1. 2011 tax forms 1040 Worksheet for Foreclosures and Repossessions (for John and Mary Elm) Part 1. 2011 tax forms 1040 Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). 2011 tax forms 1040 Otherwise, go to Part 2. 2011 tax forms 1040 1. 2011 tax forms 1040 Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $315,000. 2011 tax forms 1040 00 2. 2011 tax forms 1040 Enter the fair market value of the transferred property $290,000. 2011 tax forms 1040 00 3. 2011 tax forms 1040 Ordinary income from the cancellation of debt upon foreclosure or repossession. 2011 tax forms 1040 * Subtract line 2 from line 1. 2011 tax forms 1040 If less than zero, enter zero. 2011 tax forms 1040 Next, go to Part 2 $ 25,000. 2011 tax forms 1040 00 Part 2. 2011 tax forms 1040 Gain or loss from foreclosure or repossession. 2011 tax forms 1040   4. 2011 tax forms 1040 Enter the smaller of line 1 or line 2. 2011 tax forms 1040 If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property $290,000. 2011 tax forms 1040 00 5. 2011 tax forms 1040 Enter any proceeds you received from the foreclosure sale   6. 2011 tax forms 1040 Add line 4 and line 5 $290,000. 2011 tax forms 1040 00 7. 2011 tax forms 1040 Enter the adjusted basis of the transferred property $335,000. 2011 tax forms 1040 00 8. 2011 tax forms 1040 Gain or loss from foreclosure or repossession. 2011 tax forms 1040 Subtract line 7 from line 6 ($ 45,000. 2011 tax forms 1040 00) * The income may not be taxable. 2011 tax forms 1040 See chapter 1 for more details. 2011 tax forms 1040 Insolvency Worksheet—John and Mary Elm Date debt was canceled (mm/dd/yy) 03/01/13 Part I. 2011 tax forms 1040 Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. 2011 tax forms 1040 Credit card debt $ 5,500 2. 2011 tax forms 1040 Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 315,000 3. 2011 tax forms 1040 Car and other vehicle loans $ 4. 2011 tax forms 1040 Medical bills owed $ 5. 2011 tax forms 1040 Student loans $ 6. 2011 tax forms 1040 Accrued or past-due mortgage interest $ 7. 2011 tax forms 1040 Accrued or past-due real estate taxes $ 8. 2011 tax forms 1040 Accrued or past-due utilities (water, gas, electric) $ 9. 2011 tax forms 1040 Accrued or past-due child care costs $ 10. 2011 tax forms 1040 Federal or state income taxes remaining due (for prior tax years) $ 11. 2011 tax forms 1040 Judgments $ 12. 2011 tax forms 1040 Business debts (including those owed as a sole proprietor or partner) $ 13. 2011 tax forms 1040 Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. 2011 tax forms 1040 Other liabilities (debts) not included above $ 15. 2011 tax forms 1040 Total liabilities immediately before the cancellation. 2011 tax forms 1040 Add lines 1 through 14. 2011 tax forms 1040 $ 320,500 Part II. 2011 tax forms 1040 Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. 2011 tax forms 1040 Cash and bank account balances $ 6,000 17. 2011 tax forms 1040 Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 290,000 18. 2011 tax forms 1040 Cars and other vehicles $ 19. 2011 tax forms 1040 Computers $ 20. 2011 tax forms 1040 Household goods and furnishings (for example, appliances, electronics, furniture, etc. 2011 tax forms 1040 ) $ 21. 2011 tax forms 1040 Tools $ 22. 2011 tax forms 1040 Jewelry $ 23. 2011 tax forms 1040 Clothing $ 24. 2011 tax forms 1040 Books $ 25. 2011 tax forms 1040 Stocks and bonds $ 26. 2011 tax forms 1040 Investments in coins, stamps, paintings, or other collectibles $ 27. 2011 tax forms 1040 Firearms, sports, photographic, and other hobby equipment $ 28. 2011 tax forms 1040 Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 13,000 29. 2011 tax forms 1040 Interest in a pension plan $ 30. 2011 tax forms 1040 Interest in education accounts $ 31. 2011 tax forms 1040 Cash value of life insurance $ 32. 2011 tax forms 1040 Security deposits with landlords, utilities, and others $ 33. 2011 tax forms 1040 Interests in partnerships $ 34. 2011 tax forms 1040 Value of investment in a business $ 35. 2011 tax forms 1040 Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. 2011 tax forms 1040 Other assets not included above $ 37. 2011 tax forms 1040 FMV of total assets immediately before the cancellation. 2011 tax forms 1040 Add lines 16 through 36. 2011 tax forms 1040 $ 309,000 Part III. 2011 tax forms 1040 Insolvency 38. 2011 tax forms 1040 Amount of Insolvency. 2011 tax forms 1040 Subtract line 37 from line 15. 2011 tax forms 1040 If zero or less, you are not insolvent. 2011 tax forms 1040 $ 11,500 John and Mary's Form 982 This image is too large to be displayed in the current screen. 2011 tax forms 1040 Please click the link to view the image. 2011 tax forms 1040 Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)          Example 3—Mortgage loan foreclosure with debt exceeding $2 million limit. 2011 tax forms 1040    In 2011, Kathy and Frank Willow got married and entered into a contract with Hive Construction Corporation to build a house for $3,000,000 to be used as their main home. 2011 tax forms 1040 Kathy and Frank made a $400,000 down payment and took out a $2,600,000 mortgage to finance the remaining cost of the house. 2011 tax forms 1040 Kathy and Frank are personally liable for the mortgage loan, which is secured by the home. 2011 tax forms 1040   In November 2013, when the outstanding principal balance on the mortgage loan was $2,500,000, the FMV of the property fell to $1,750,000 and Kathy and Frank abandoned the property by permanently moving out. 2011 tax forms 1040 The lender foreclosed on the property and, on December 5, 2013, sold the property to another buyer for $1,750,000. 2011 tax forms 1040 On December 26, 2013, the lender canceled the remaining debt. 2011 tax forms 1040 Kathy and Frank have no tax attributes other than basis of personal-use property. 2011 tax forms 1040   The lender issued a 2013 Form 1099-C to Kathy and Frank showing canceled debt of $750,000 in box 2 (the remaining balance on the $2,500,000 mortgage debt after application of the foreclosure sale proceeds) and $1,750,000 in box 7 (FMV of the property). 2011 tax forms 1040 Identifiable event code "D" appears in box 6. 2011 tax forms 1040 This box shows the reason the creditor has filed Form 1099-C. 2011 tax forms 1040 Although Kathy and Frank abandoned the property, the lender did not need to also file a Form 1099-A because the lender canceled the debt in connection with the foreclosure in the same calendar year. 2011 tax forms 1040 Kathy and Frank are filing a joint return for 2013. 2011 tax forms 1040   Because the foreclosure occurred prior to the debt cancellation, Kathy and Frank first calculate their gain or loss from the foreclosure using Table 1-1. 2011 tax forms 1040 Because Kathy and Frank remained personally liable for the $750,000 debt remaining after the foreclosure ($2,500,000 outstanding debt immediately before the foreclosure minus $1,750,000 satisfied through the sale of the home), Kathy and Frank enter $1,750,000 on line 1 of Table 1-1 ($2,500,000 outstanding debt immediately before the foreclosure minus the $750,000 for which they remained liable). 2011 tax forms 1040 Completing Table 1-1, Kathy and Frank find that they have no ordinary income from the cancellation of debt upon foreclosure and that they have a $1,250,000 loss. 2011 tax forms 1040 Because this loss relates to their home, it is a nondeductible loss. 2011 tax forms 1040   Because the lender later canceled the remaining amount of the debt, Kathy and Frank must also determine whether that canceled debt is taxable. 2011 tax forms 1040 Immediately before the cancellation, Kathy and Frank had $15,000 in a savings account, household furnishings with an FMV of $17,000, a car with an FMV of $10,000, and $18,000 in credit card debt. 2011 tax forms 1040 Kathy and Frank also had the $750,000 remaining balance on the mortgage loan at that time. 2011 tax forms 1040 The household furnishings originally cost $30,000. 2011 tax forms 1040 The car had been fully paid off (so there was no related outstanding debt) and was originally purchased for $16,000. 2011 tax forms 1040 Kathy and Frank had no adjustments to the cost basis of the car. 2011 tax forms 1040 Kathy and Frank had no other assets or liabilities at the time of the cancellation. 2011 tax forms 1040 Kathy and Frank complete the insolvency worksheet to calculate that they were insolvent to the extent of $726,000 immediately before the cancellation ($768,000 of total liabilities minus $42,000 FMV of total assets). 2011 tax forms 1040   At the beginning of 2014, Kathy and Frank had $9,000 in their savings account and $15,000 in credit card debt. 2011 tax forms 1040 Kathy and Frank also owned the same car at that time (still with an FMV of $10,000 and basis of $16,000) and the same household furnishings (still with an FMV of $17,000 and a basis of $30,000). 2011 tax forms 1040 Kathy and Frank had no other assets or liabilities at that time. 2011 tax forms 1040 Kathy and Frank no longer own the home because the lender foreclosed on it in 2013. 2011 tax forms 1040   Because the canceled debt is qualified principal residence indebtedness, the insolvency exclusion does not apply unless Kathy and Frank elect to apply the insolvency exclusion instead of the qualified principal residence indebtedness exclusion. 2011 tax forms 1040 The maximum amount that Kathy and Frank can treat as qualified principal residence indebtedness is $2,000,000. 2011 tax forms 1040 The remaining $500,000 ($2,500,000 outstanding mortgage loan minus $2,000,000 limit on qualified principal residence indebtedness) is not qualified principal residence indebtedness. 2011 tax forms 1040 Because only a part of the loan is qualified principal residence indebtedness, Kathy and Frank must apply the ordering rule to the canceled debt. 2011 tax forms 1040 Under the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent that the amount canceled ($750,000) exceeds the amount of the loan (immediately before the cancellation) that is not qualified principal residence indebtedness ($500,000). 2011 tax forms 1040 This means that Kathy and Frank can only exclude $250,000 ($750,000 amount canceled minus $500,000 nonqualified debt) under the qualified principal residence indebtedness exclusion. 2011 tax forms 1040   Kathy and Frank do not elect to have the insolvency exclusion apply instead of the qualified principal residence exclusion. 2011 tax forms 1040 Nonetheless, they can still apply the insolvency exclusion to the $500,000 nonqualified debt because it is not qualified principal residence indebtedness. 2011 tax forms 1040 Kathy and Frank can exclude the remaining $500,000 canceled debt under the insolvency exclusion because they were insolvent immediately before the cancellation to the extent of $726,000. 2011 tax forms 1040 Thus, Kathy and Frank check the boxes on lines 1b and 1e of Form 982 and enter $750,000 on line 2 ($250,000 excluded under the qualified principal residence indebtedness exclusion plus $500,000 excluded under the insolvency exclusion). 2011 tax forms 1040   Next, Kathy and Frank reduce their tax attributes using Part II of Form 982. 2011 tax forms 1040 Because Kathy and Frank no longer own the home due to the foreclosure, Kathy and Frank have no remaining basis in the home at the time of the debt cancellation. 2011 tax forms 1040 Thus, Kathy and Frank leave line 10b of Form 982 blank. 2011 tax forms 1040 However, Kathy and Frank are also excluding nonqualified debt under the insolvency exclusion. 2011 tax forms 1040 As a result, Kathy and Frank must reduce the basis of property they own based on the amount of canceled debt they are excluding from income under the insolvency rules. 2011 tax forms 1040 Because Kathy and Frank have no tax attributes other than basis of personal-use property to reduce, Kathy and Frank figure the amount they must include on line 10a of Form 982 by taking the smallest of: The $46,000 bases of their personal-use property held at the beginning of 2014 ($16,000 basis in the car plus $30,000 basis in household furnishings), The $500,000 of the nonbusiness debt (other than qualified principal residence indebtedness) that they are excluding from income on line 2 of Form 982, or The $43,000 excess of the total bases of the property and the amount of money they held immediately after the cancellation over their total liabilities immediately after the cancellation ($15,000 in savings account plus $30,000 basis in household furnishings plus $16,000 adjusted basis in car minus $18,000 credit card debt). 2011 tax forms 1040 Kathy and Frank enter $43,000 on Form 982, line 10a and reduce their bases in the car and the household furnishings in proportion to the total adjusted bases in all their property. 2011 tax forms 1040 Kathy and Frank reduce the basis in the car by $14,956. 2011 tax forms 1040 52 ($43,000 x $16,000/$46,000). 2011 tax forms 1040 And they reduce the basis in the household furnishings by $28,043. 2011 tax forms 1040 48 ($43,000 x $30,000/$46,000). 2011 tax forms 1040   Following are Kathy and Frank's sample forms and worksheets. 2011 tax forms 1040 Frank and Kathy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. 2011 tax forms 1040 Please click the link to view the image. 2011 tax forms 1040 Form 1099-C, Cancellation of Debt Table 1-1. 2011 tax forms 1040 Worksheet for Foreclosures and Repossessions (for Frank and Kathy Willow) Part 1. 2011 tax forms 1040 Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). 2011 tax forms 1040 Otherwise, go to Part 2. 2011 tax forms 1040 1. 2011 tax forms 1040 Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $1,750,000. 2011 tax forms 1040 00 2. 2011 tax forms 1040 Enter the fair market value of the transferred property $1,750,000. 2011 tax forms 1040 00 3. 2011 tax forms 1040 Ordinary income from the cancellation of debt upon foreclosure or repossession. 2011 tax forms 1040 * Subtract line 2 from line 1. 2011 tax forms 1040 If less than zero, enter zero. 2011 tax forms 1040 Next, go to Part 2 $0. 2011 tax forms 1040 00 Part 2. 2011 tax forms 1040 Gain or loss from foreclosure or repossession. 2011 tax forms 1040   4. 2011 tax forms 1040 Enter the smaller of line 1 or line 2. 2011 tax forms 1040 If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property. 2011 tax forms 1040 $1,750,000. 2011 tax forms 1040 00 5. 2011 tax forms 1040 Enter any proceeds you received from the foreclosure sale   6. 2011 tax forms 1040 Add line 4 and line 5 $1,750,000. 2011 tax forms 1040 00 7. 2011 tax forms 1040 Enter the adjusted basis of the transferred property $3,000,000. 2011 tax forms 1040 00 8. 2011 tax forms 1040 Gain or loss from foreclosure or repossession. 2011 tax forms 1040 Subtract line 7 from line 6 ($1,250,000. 2011 tax forms 1040 00) * The income may not be taxable. 2011 tax forms 1040 See chapter 1 for more details. 2011 tax forms 1040    Insolvency Worksheet—Frank and Kathy Willow Date debt was canceled (mm/dd/yy) 12/26/13 Part I. 2011 tax forms 1040 Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. 2011 tax forms 1040 Credit card debt $ 18,000 2. 2011 tax forms 1040 Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 750,000 3. 2011 tax forms 1040 Car and other vehicle loans $ 4. 2011 tax forms 1040 Medical bills owed $ 5. 2011 tax forms 1040 Student loans $ 6. 2011 tax forms 1040 Accrued or past-due mortgage interest $ 7. 2011 tax forms 1040 Accrued or past-due real estate taxes $ 8. 2011 tax forms 1040 Accrued or past-due utilities (water, gas, electric) $ 9. 2011 tax forms 1040 Accrued or past-due child care costs $ 10. 2011 tax forms 1040 Federal or state income taxes remaining due (for prior tax years) $ 11. 2011 tax forms 1040 Judgments $ 12. 2011 tax forms 1040 Business debts (including those owed as a sole proprietor or partner) $ 13. 2011 tax forms 1040 Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. 2011 tax forms 1040 Other liabilities (debts) not included above $ 15. 2011 tax forms 1040 Total liabilities immediately before the cancellation. 2011 tax forms 1040 Add lines 1 through 14. 2011 tax forms 1040 $ 768,000 Part II. 2011 tax forms 1040 Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. 2011 tax forms 1040 Cash and bank account balances $ 15,000 17. 2011 tax forms 1040 Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 18. 2011 tax forms 1040 Cars and other vehicles $ 10,000 19. 2011 tax forms 1040 Computers $ 20. 2011 tax forms 1040 Household goods and furnishings (for example, appliances, electronics, furniture, etc. 2011 tax forms 1040 ) $ 17,000 21. 2011 tax forms 1040 Tools $ 22. 2011 tax forms 1040 Jewelry $ 23. 2011 tax forms 1040 Clothing $ 24. 2011 tax forms 1040 Books $ 25. 2011 tax forms 1040 Stocks and bonds $ 26. 2011 tax forms 1040 Investments in coins, stamps, paintings, or other collectibles $ 27. 2011 tax forms 1040 Firearms, sports, photographic, and other hobby equipment $ 28. 2011 tax forms 1040 Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 29. 2011 tax forms 1040 Interest in a pension plan $ 30. 2011 tax forms 1040 Interest in education accounts $ 31. 2011 tax forms 1040 Cash value of life insurance $ 32. 2011 tax forms 1040 Security deposits with landlords, utilities, and others $ 33. 2011 tax forms 1040 Interests in partnerships $ 34. 2011 tax forms 1040 Value of investment in a business $ 35. 2011 tax forms 1040 Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. 2011 tax forms 1040 Other assets not included above $ 37. 2011 tax forms 1040 FMV of total assets immediately before the cancellation. 2011 tax forms 1040 Add lines 16 through 36. 2011 tax forms 1040 $ 42,000 Part III. 2011 tax forms 1040 Insolvency 38. 2011 tax forms 1040 Amount of Insolvency. 2011 tax forms 1040 Subtract line 37 from line 15. 2011 tax forms 1040 If zero or less, you are not insolvent. 2011 tax forms 1040 $ 726,000    Frank and Kathy's Form 982 This image is too large to be displayed in the current screen. 2011 tax forms 1040 Please click the link to view the image. 2011 tax forms 1040 Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Prev  Up  Next   Home   More Online Publications