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Amending My 2010 Tax Return

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Amending My 2010 Tax Return

Amending my 2010 tax return Publication 4681 - Introductory Material Table of Contents Reminder IntroductionOrdering forms and publications. Amending my 2010 tax return Tax questions. Amending my 2010 tax return Useful Items - You may want to see: Common Situations Covered In This Publication Reminder Future Developments. Amending my 2010 tax return  Information about any future developments affecting Publication 4681 (such as legislation enacted after we release it) will be posted at www. Amending my 2010 tax return irs. Amending my 2010 tax return gov/pub4681. Amending my 2010 tax return Photographs of missing children. Amending my 2010 tax return   The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Amending my 2010 tax return Photographs of missing children selected by the Center may appear in this publication on pages that otherwise would be blank. Amending my 2010 tax return You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Amending my 2010 tax return Introduction This publication explains the federal tax treatment of canceled debts, foreclosures, repossessions, and abandonments. Amending my 2010 tax return Generally, if you owe a debt to someone else and they cancel or forgive that debt for less than its full amount, you are treated for income tax purposes as having income and may have to pay tax on this income. Amending my 2010 tax return Note. Amending my 2010 tax return This publication generally refers to debt that is canceled, forgiven, or discharged for less than the full amount of the debt as “canceled debt. Amending my 2010 tax return ” Sometimes a debt, or part of a debt, that you do not have to pay is not considered canceled debt. Amending my 2010 tax return These exceptions are discussed later under Exceptions . Amending my 2010 tax return Sometimes a canceled debt may be excluded from your income. Amending my 2010 tax return But if you do exclude canceled debt from income, you may be required to reduce your “tax attributes. Amending my 2010 tax return ” These exclusions and the reduction of tax attributes associated with them are discussed later under Exclusions . Amending my 2010 tax return Foreclosure and repossession are remedies that your lender may exercise if you fail to make payments on your loan and you have previously granted that lender a mortgage or other security interest in some of your property. Amending my 2010 tax return These remedies allow the lender to seize or sell the property securing the loan. Amending my 2010 tax return When your property is foreclosed upon or repossessed and sold, you are treated as having sold the property and you may recognize taxable gain. Amending my 2010 tax return Whether you also recognize income from canceled debt depends in part on whether you are personally liable for the debt and in part on whether the outstanding loan balance is more than the fair market value (FMV) of the property. Amending my 2010 tax return Figuring your gain or loss and income from canceled debt arising from a foreclosure or repossession is discussed later under Foreclosures and Repossessions . Amending my 2010 tax return Generally, you abandon property when you voluntarily and permanently give up possession and use of property you own with the intention of ending your ownership but without passing it on to anyone else. Amending my 2010 tax return Figuring your gain or loss and income from canceled debt arising from an abandonment is discussed later under Abandonments . Amending my 2010 tax return This publication also includes detailed examples with filled-in forms. Amending my 2010 tax return Comments and suggestions. Amending my 2010 tax return    We welcome your comments about this publication and your suggestions for future editions. Amending my 2010 tax return   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Amending my 2010 tax return NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Amending my 2010 tax return Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Amending my 2010 tax return   You can send your comments from www. Amending my 2010 tax return irs. Amending my 2010 tax return gov/formspubs. Amending my 2010 tax return Click on “More Information” and then on “Comment on Tax Forms and Publications”. Amending my 2010 tax return   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Amending my 2010 tax return Ordering forms and publications. Amending my 2010 tax return    Visit www. Amending my 2010 tax return irs. Amending my 2010 tax return gov/formspubs to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Amending my 2010 tax return Internal Revenue Service 1201 N. Amending my 2010 tax return Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Amending my 2010 tax return    If you have a tax question, check the information available on IRS. Amending my 2010 tax return gov or call 1-800-829-1040. Amending my 2010 tax return We cannot answer tax questions sent to either of the above addresses. Amending my 2010 tax return Useful Items - You may want to see: Publication 225 Farmer's Tax Guide 334 Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) 523 Selling Your Home 525 Taxable and Nontaxable Income 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 542 Corporations 544 Sales and Other Dispositions of Assets 551 Basis of Assets 908 Bankruptcy Tax Guide Form (and Instructions) 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) 1099-C Cancellation of Debt 1099-DIV Dividends and Distributions 3800 General Business Credit Common Situations Covered In This Publication The sections of this publication that apply to you depend on the type of debt canceled, the tax attributes you have, and whether or not you continue to own the property that was subject to the debt. Amending my 2010 tax return Some examples of common circumstances are provided in the following paragraphs to help guide you through this publication. Amending my 2010 tax return These examples do not cover every situation but are intended to provide general guidance for the most common situations. Amending my 2010 tax return Nonbusiness credit card debt cancellation. Amending my 2010 tax return    If you had a nonbusiness credit card debt canceled, you may be able to exclude the canceled debt from income if the cancellation occurred in a title 11 bankruptcy case or you were insolvent immediately before the cancellation. Amending my 2010 tax return You should read Bankruptcy or Insolvency under Exclusions in chapter 1 to see if you can exclude the canceled debt from income under one of those provisions. Amending my 2010 tax return If you can exclude part or all of the canceled debt from income, you should also read Bankruptcy and Insolvency under Reduction of Tax Attributes in chapter 1. Amending my 2010 tax return Personal vehicle repossession. Amending my 2010 tax return    If you had a personal vehicle repossessed and disposed of by the lender during the year, you will need to determine your gain or nondeductible loss on the disposition. Amending my 2010 tax return This is explained in chapter 2 . Amending my 2010 tax return If the lender also canceled all or part of the remaining amount of the loan, you may be able to exclude the canceled debt from income if the cancellation occurred in a title 11 bankruptcy case or you were insolvent immediately before the cancellation. Amending my 2010 tax return You should read Bankruptcy or Insolvency under Exclusions in chapter 1 to see if you can exclude the canceled debt from income under one of those provisions. Amending my 2010 tax return If you can exclude part or all of the canceled debt from income, you should also read Bankruptcy and Insolvency under Reduction of Tax Attributes in chapter 1. Amending my 2010 tax return Main home foreclosure or abandonment. Amending my 2010 tax return    If a lender foreclosed on your main home during the year, you will need to determine your gain or loss on the foreclosure. Amending my 2010 tax return Foreclosures are explained in chapter 2 and abandonments are explained in chapter 3. Amending my 2010 tax return If the lender also canceled all or part of the remaining amount on the mortgage loan and you were personally liable for the debt, you should also read Qualified Principal Residence Indebtedness under Exclusions in chapter 1 to see if you can exclude part or all of the canceled debt from income. Amending my 2010 tax return Detailed Example 2 and Example 3 in chapter 4 use filled-in forms to help explain these provisions. Amending my 2010 tax return Main home loan modification (workout agreement). Amending my 2010 tax return    If a lender agrees to a mortgage loan modification (a “workout”) that includes a reduction in the principal balance of the loan, you should read Qualified Principal Residence Indebtedness under Exclusions in chapter 1 to see if you can exclude part or all of the canceled debt from income. Amending my 2010 tax return If you can exclude part or all of the canceled debt from income, you should also read Qualified Principal Residence Indebtedness under Reduction of Tax Attributes in chapter 1. Amending my 2010 tax return Detailed Example 1 in chapter 4 uses filled-in forms to help explain the tax implications of a mortgage workout scenario. Amending my 2010 tax return Prev  Up  Next   Home   More Online Publications
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Page Last Reviewed or Updated: 28-Mar-2014

The Amending My 2010 Tax Return

Amending my 2010 tax return 1. Amending my 2010 tax return   Canceled Debts Table of Contents General RulesForm 1099-C Discounts and loan modifications Sales or other dispositions (such as foreclosures and repossessions) Abandonments Stockholder debt This chapter discusses the tax treatment of canceled debts. Amending my 2010 tax return General Rules Generally, if a debt for which you are personally liable is forgiven or discharged for less than the full amount owed, the debt is considered canceled in whatever amount it remained unpaid. Amending my 2010 tax return There are exceptions to this rule, discussed under Exceptions , later. Amending my 2010 tax return Generally, you must include the canceled debt in your income. Amending my 2010 tax return However, you may be able to exclude the canceled debt. Amending my 2010 tax return See Exclusions , later. Amending my 2010 tax return Example. Amending my 2010 tax return John owed $1,000 to Mary. Amending my 2010 tax return Mary agreed to accept and John paid $400 in satisfaction of the entire debt. Amending my 2010 tax return John has canceled debt of $600. Amending my 2010 tax return Example. Amending my 2010 tax return Margaret owed $1,000 to Henry. Amending my 2010 tax return Henry and Margaret agreed that Margaret would provide Henry with services (instead of money) in full satisfaction of the debt. Amending my 2010 tax return Margaret does not have canceled debt. Amending my 2010 tax return Instead, she has income from services. Amending my 2010 tax return A debt includes any indebtedness: For which you are liable, or Subject to which you hold property. Amending my 2010 tax return Debt for which you are personally liable is recourse debt. Amending my 2010 tax return All other debt is nonrecourse debt. Amending my 2010 tax return If you are not personally liable for the debt, you do not have ordinary income from the cancellation of debt unless you retain the collateral and either: The lender offers a discount for the early payment of the debt, or The lender agrees to a loan modification that results in the reduction of the principal balance of the debt. Amending my 2010 tax return See Discounts and loan modifications , later. Amending my 2010 tax return However, upon the disposition of the property securing a nonrecourse debt, the amount realized includes the entire unpaid amount of the debt, not just the FMV of the property. Amending my 2010 tax return As a result, you may realize a gain or loss if the outstanding debt immediately before the disposition is more or less than your adjusted basis in the property. Amending my 2010 tax return For more details on figuring your gain or loss, see chapter 2 of this publication or see Publication 544. Amending my 2010 tax return There are several exceptions and exclusions that may result in part or all of a canceled debt being nontaxable. Amending my 2010 tax return See Exceptions and Exclusions, later. Amending my 2010 tax return You must report any taxable canceled debt as ordinary income on: Form 1040 or Form 1040NR, line 21, if the debt is a nonbusiness debt; Schedule C (Form 1040), line 6 (or Schedule C-EZ (Form 1040), line 1), if the debt is related to a nonfarm sole proprietorship; Schedule E (Form 1040), line 3, if the debt is related to nonfarm rental of real property; Form 4835, line 6, if the debt is related to a farm rental activity for which you use Form 4835 to report farm rental income based on crops or livestock produced by a tenant; or Schedule F (Form 1040), line 8, if the debt is farm debt and you are a farmer. Amending my 2010 tax return Form 1099-C If you receive a Form 1099-C, that means an applicable entity has reported an identifiable event to the IRS regarding a debt you owe. Amending my 2010 tax return The identifiable event may be an actual cancellation of the debt or it may be an event the applicable entity is required, solely for purposes of reporting to the IRS, to treat as a cancellation of debt. Amending my 2010 tax return For information on the reasons an applicable entity files Form 1099-C, see Identifiable event codes, later. Amending my 2010 tax return Unless you meet one of the exceptions or exclusions discussed later, this canceled debt is ordinary income and must be reported on the appropriate form discussed above. Amending my 2010 tax return An applicable entity includes: A federal government agency, A financial institution, A credit union, and Any organization a significant trade or business of which is lending money. Amending my 2010 tax return Identifiable event codes. Amending my 2010 tax return    Box 6 of Form 1099-C should indicate the reason the creditor filed this form. Amending my 2010 tax return The codes shown in box 6 are explained below. Amending my 2010 tax return Also see the chart after the explanation for a quick reference guide for the codes used in Box 6. Amending my 2010 tax return Note. Amending my 2010 tax return Codes A through G and I identify specific occurrences resulting from an actual discharge of indebtedness. Amending my 2010 tax return However, Code H, Expiration of nonpayment testing period, does not necessarily identify an actual discharge of indebtedness. Amending my 2010 tax return Code A — Bankruptcy. Amending my 2010 tax return Code A is used to identify cancellation of debt as a result of a title 11 bankruptcy case. Amending my 2010 tax return See Bankruptcy , later. Amending my 2010 tax return Code B — Other judicial debt relief. Amending my 2010 tax return Code B is used to identify cancellation of debt as a result of a receivership, foreclosure, or similar federal or state court proceeding other than bankruptcy. Amending my 2010 tax return Code C — Statute of limitations or expiration of deficiency period. Amending my 2010 tax return Code C is used to identify cancellation of debt either when the statute of limitations for collecting the debt expires or when the statutory period for filing a claim or beginning a deficiency judgment proceeding expires. Amending my 2010 tax return In the case of the expiration of a statute of limitations, an identifiable event occurs only if and when your affirmative defense of the statute of limitations is upheld in a final judgment or decision in a judicial proceeding, and the period for appealing the judgment or decision has expired. Amending my 2010 tax return Code D — Foreclosure election. Amending my 2010 tax return Code D is used to identify cancellation of debt when the creditor elects foreclosure remedies that statutorily end or bar the creditor's right to pursue collection of the debt. Amending my 2010 tax return This event applies to a mortgage lender or holder who is barred from pursuing debt collection after a power of sale in the mortgage or deed of trust is exercised. Amending my 2010 tax return Code E — Debt relief from probate or similar proceeding. Amending my 2010 tax return Code E is used to identify cancellation of debt as a result of a probate court or similar legal proceeding. Amending my 2010 tax return Code F — By agreement. Amending my 2010 tax return Code F is used to identify cancellation of debt as a result of an agreement between the creditor and the debtor to cancel the debt at less than full consideration. Amending my 2010 tax return Code G — Decision or policy to discontinue collection. Amending my 2010 tax return Code G is used to identify cancellation of debt as a result of a decision or a defined policy of the creditor to discontinue collection activity and cancel the debt. Amending my 2010 tax return For purposes of this identifiable event, a defined policy includes both a written policy and the creditor's established business practice. Amending my 2010 tax return Code H — Expiration of nonpayment testing period. Amending my 2010 tax return Code H is used to indicate that the creditor has not received a payment on the debt during a testing period ending on December 31, 2013. Amending my 2010 tax return The testing period is a 36-month period increased by the number of months the creditor was prevented from engaging in collection activity by a stay in bankruptcy or similar bar under state or local law. Amending my 2010 tax return This identifiable event applies only for a creditor that is a financial institution or credit union (and certain of their subsidiaries), the Federal Deposit Insurance Corporation (FDIC), Resolution Trust Corporation (RTC), National Credit Union Administration (NCUA), and other Federal executive agencies. Amending my 2010 tax return Expiration of the nonpayment testing period does not necessarily result from an actual discharge of indebtedness. Amending my 2010 tax return Code I — Other actual discharge before identifiable event. Amending my 2010 tax return Code I is used to identify an actual cancellation of debt that occurs before any of the identifiable events described in codes A through H. Amending my 2010 tax return Form 1099-C Reference Guide for Box 6 Identifiable Event Codes A Bankruptcy B Other judicial debt relief C Statute of limitations or expiration of deficiency period D Foreclosure election E Debt relief from probate or similar proceeding F By agreement G Decision or policy to discontinue collection H Expiration of nonpayment testing period I Other actual discharge before identifiable event Even if you did not receive a Form 1099-C, you must report canceled debt as gross income on your tax return unless one of the exceptions or exclusions described later applies. Amending my 2010 tax return Amount of canceled debt. Amending my 2010 tax return    The amount in box 2 of Form 1099-C may represent some or all of the debt that has been canceled or treated as canceled. Amending my 2010 tax return The amount in box 2 will include principal and may include interest and other nonprincipal amounts (such as fees or penalties). Amending my 2010 tax return Unless you meet one of the exceptions or exclusions discussed later, the amount of the debt that has been canceled is ordinary income and must be reported on the appropriate form as discussed earlier. Amending my 2010 tax return Interest included in canceled debt. Amending my 2010 tax return    If any interest is included in the amount of canceled debt in box 2, it will be shown in box 3. Amending my 2010 tax return Whether the interest portion of the canceled debt must be included in your income depends on whether the interest would be deductible if you paid it. Amending my 2010 tax return See Deductible Debt under Exceptions, later. Amending my 2010 tax return Persons who each receive a Form 1099-C showing the full amount of debt. Amending my 2010 tax return    If you and another person were jointly and severally liable for a canceled debt, each of you may get a Form 1099-C showing the entire amount of the canceled debt. Amending my 2010 tax return However, you may not have to report that entire amount as income. Amending my 2010 tax return The amount, if any, you must report depends on all the facts and circumstances, including: State law, The amount of debt proceeds each person received, How much of any interest deduction from the debt was claimed by each person, How much of the basis of any co-owned property bought with the debt proceeds was allocated to each co-owner, and Whether the canceled debt qualifies for any of the exceptions or exclusions described in this publication. Amending my 2010 tax return See Example 3 under Insolvency, later. Amending my 2010 tax return Discounts and loan modifications If a lender discounts (reduces) the principal balance of a loan because you pay it off early, or agrees to a loan modification (a “workout”) that includes a reduction in the principal balance of a loan, the amount of the discount or the amount of principal reduction is canceled debt. Amending my 2010 tax return However, if the debt is nonrecourse and you did not retain the collateral, you do not have cancellation of the debt income. Amending my 2010 tax return The amount of the canceled debt must be included in income unless one of the exceptions or exclusions described later applies. Amending my 2010 tax return For more details, see Exceptions and Exclusions, later. Amending my 2010 tax return Sales or other dispositions (such as foreclosures and repossessions) Recourse debt. Amending my 2010 tax return   If you owned property that was subject to a recourse debt in excess of the FMV of the property, the lender's foreclosure or repossession of the property is treated as a sale or disposition of the property by you and may result in your realization of gain or loss. Amending my 2010 tax return The gain or loss on the disposition of the property is measured by the difference between the FMV of the property at the time of the disposition and your adjusted basis (usually your cost) in the property. Amending my 2010 tax return The character of the gain or loss (such as ordinary or capital) is determined by the character of the property. Amending my 2010 tax return If the lender forgives all or part of the amount of the debt in excess of the FMV of the property, the cancellation of the excess debt may result in ordinary income. Amending my 2010 tax return The ordinary income from the cancellation of debt (the excess of the canceled debt over the FMV of the property) must be included in your gross income reported on your tax return unless one of the exceptions or exclusions described later applies. Amending my 2010 tax return For more details, see Exceptions and Exclusions, later. Amending my 2010 tax return Nonrecourse debt. Amending my 2010 tax return   If you owned property that was subject to a nonrecourse debt in excess of the FMV of the property, the lender's foreclosure on the property does not result in ordinary income from the cancellation of debt. Amending my 2010 tax return The entire amount of the nonrecourse debt is treated as an amount realized on the disposition of the property. Amending my 2010 tax return The gain or loss on the disposition of the property is measured by the difference between the total amount realized (the entire amount of the nonrecourse debt plus the amount of cash and the FMV of any property received) and your adjusted basis in the property. Amending my 2010 tax return The character of the gain or loss is determined by the character of the property. Amending my 2010 tax return More information. Amending my 2010 tax return    See Publications 523, 544, and 551, and chapter 2 of this publication for more details. Amending my 2010 tax return Abandonments Recourse debt. Amending my 2010 tax return   If you abandon property that secures a debt for which you are personally liable (recourse debt) and the debt is canceled, you will realize ordinary income equal to the canceled debt. Amending my 2010 tax return You must report this income on your tax return unless one of the exceptions or exclusions described later applies. Amending my 2010 tax return For more details, see Exceptions and Exclusions, later. Amending my 2010 tax return This income is separate from any amount realized from the abandonment of the property. Amending my 2010 tax return For more details, see chapter 3. Amending my 2010 tax return Nonrecourse debt. Amending my 2010 tax return   If you abandon property that secures a debt for which you are not personally liable (nonrecourse debt), you may realize gain or loss but will not have cancellation of indebtedness income. Amending my 2010 tax return Stockholder debt If you are a stockholder in a corporation and the corporation cancels or forgives your debt to it, the canceled debt is a constructive distribution. Amending my 2010 tax return For more information, see Publication 542, Corporations. Amending my 2010 tax return Prev  Up  Next   Home   More Online Publications