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Hr block taxes online Publication 571 - Introductory Material Table of Contents Future Developments What's New for 2013 What's New for 2014 Reminder IntroductionOrdering forms and publications. Hr block taxes online Tax questions. Hr block taxes online Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 571 and its instructions, such as legislation enacted after they were published, go to www. Hr block taxes online irs. Hr block taxes online gov/pub571. Hr block taxes online What's New for 2013 Retirement savings contributions credit. Hr block taxes online  For 2013, the adjusted gross income limitations have increased from $57,500 to $59,000 for married filing jointly filers, from $43,125 to $44,250 for head of household filers, and from $28,750 to $29,500 for single, married filing separately, or qualifying widow(er) with dependent child filers. Hr block taxes online See chapter 10, Retirement Savings Contributions Credit (Saver's Credit), for additional information. Hr block taxes online Limit on elective deferrals. Hr block taxes online  For 2013, the limit on elective deferrals has increased from $17,000 to $17,500. Hr block taxes online Limit on annual additions. Hr block taxes online  For 2013, the limit on annual additions has increased from $50,000 to $51,000. Hr block taxes online What's New for 2014 Retirement savings contributions credit. Hr block taxes online  For 2014, the adjusted gross income limitations have increased from $59,000 to $60,000 for married filing jointly filers, from $44,250 to $45,000 for head of household filers, and from $29,500 to $30,000 for single, married filing separately, or qualifying widow(er) with dependent child filers. Hr block taxes online See chapter 10, Retirement Savings Contributions Credit (Saver's Credit), for additional information. Hr block taxes online Limit on elective deferrals. Hr block taxes online  For 2014, the limit on elective deferrals remains unchanged at $17,500. Hr block taxes online Limit on annual additions. Hr block taxes online  For 2014, the limit on annual additions has increased from $51,000 to $52,000. Hr block taxes online Reminder Photographs of missing children. Hr block taxes online  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Hr block taxes online Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Hr block taxes online 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. Hr block taxes online Introduction This publication can help you better understand the tax rules that apply to your 403(b) (tax-sheltered annuity) plan. Hr block taxes online In this publication, you will find information to help you: Determine the maximum amount that can be contributed to your 403(b) account in 2014. Hr block taxes online Determine the maximum amount that could have been contributed to your 403(b) account in 2013. Hr block taxes online Identify excess contributions. Hr block taxes online Understand the basic rules for claiming the retirement savings contributions credit. Hr block taxes online Understand the basic rules for distributions and rollovers from 403(b) accounts. Hr block taxes online This publication does not provide specific information on the following topics. Hr block taxes online Distributions from 403(b) accounts. Hr block taxes online This is covered in Publication 575, Pension and Annuity Income. Hr block taxes online Rollovers. Hr block taxes online This is covered in Publication 590, Individual Retirement Arrangements (IRAs). Hr block taxes online How to use this publication. Hr block taxes online   This publication is organized into chapters to help you find information easily. Hr block taxes online    Chapter 1 answers questions frequently asked by 403(b) plan participants. Hr block taxes online    Chapters 2 through 6 explain the rules and terms you need to know to figure the maximum amount that could have been contributed to your 403(b) account for 2013 and the maximum amount that can be contributed to your 403(b) account in 2014. Hr block taxes online    Chapter 7 provides general information on the prevention and correction of excess contributions to your 403(b) account. Hr block taxes online    Chapter 8 provides general information on distributions, transfers, and rollovers. Hr block taxes online    Chapter 9 provides blank worksheets that you will need to accurately and actively participate in your 403(b) plan. Hr block taxes online Filled-in samples of most of these worksheets can be found throughout this publication. Hr block taxes online    Chapter 10 explains the rules for claiming the retirement savings contributions credit (saver's credit). Hr block taxes online Comments and suggestions. Hr block taxes online   We welcome your comments about this publication and your suggestions for future editions. Hr block taxes online   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Hr block taxes online NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Hr block taxes online Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Hr block taxes online   You can send your comments from www. Hr block taxes online irs. Hr block taxes online gov/formspubs/. Hr block taxes online Click on “More Information” and then on “Comment on Tax Forms and Publications. Hr block taxes online ”   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. Hr block taxes online Ordering forms and publications. Hr block taxes online   Visit www. Hr block taxes online irs. Hr block taxes online 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. Hr block taxes online  Internal Revenue Service 1201 N. Hr block taxes online Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Hr block taxes online   If you have a tax question, check the information available on IRS. Hr block taxes online gov or call 1-800-829-1040. Hr block taxes online We cannot answer tax questions sent to either of the above addresses. Hr block taxes online Useful Items - You may want to see: Publication 517 Social Security and Other Information for Members of the Clergy and Religious Workers 575 Pension and Annuity Income 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) W-2 Wage and Tax Statement 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Hr block taxes online 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts 5330 Return of Excise Taxes Related to Employee Benefit Plans Prev  Up  Next   Home   More Online Publications
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Hr block taxes online 4. Hr block taxes online   Detailed Examples Table of Contents These examples use actual forms to help you prepare your income tax return. Hr block taxes online However, the information shown on the filled-in forms is not from any actual person or scenario. Hr block taxes online Example 1—Mortgage loan modification. Hr block taxes online    In 2007, Nancy Oak bought a main home for $435,000. Hr block taxes online Nancy took out a $420,000 mortgage loan to buy the home and made a down payment of $15,000. Hr block taxes online The loan was secured by the home. Hr block taxes online The mortgage loan was a recourse debt, meaning that Nancy was personally liable for the debt. Hr block taxes online 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. Hr block taxes online    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. Hr block taxes online The FMV of Nancy's home at the time of the refinancing was $500,000. Hr block taxes online 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. Hr block taxes online 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. Hr block taxes online   In 2013, Nancy was unable to make her mortgage loan payments. Hr block taxes online 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. Hr block taxes online Nancy was neither insolvent nor in bankruptcy at the time of the loan modification. Hr block taxes online   Nancy received a 2013 Form 1099-C from her bank in January 2014 showing canceled debt of $40,000 in box 2. Hr block taxes online Identifiable event code "F" appears in box 6. Hr block taxes online This box shows the reason the creditor has filed Form 1099-C. Hr block taxes online 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. Hr block taxes online Nancy determines that the only exception or exclusion that applies to her is the qualified principal residence indebtedness exclusion. Hr block taxes online   Next, Nancy determines the amount, if any, of the $40,000 of canceled debt that was qualified principal residence indebtedness. Hr block taxes online 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. Hr block taxes online 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. Hr block taxes online 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). Hr block taxes online   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. Hr block taxes online 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). Hr block taxes online Nancy must also include the $35,000 nonqualified debt portion in income on Form 1040, line 21. Hr block taxes online You can see Nancy's Form 1099-C and a portion of her Form 1040 below. Hr block taxes online Nancy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Hr block taxes online Please click the link to view the image. Hr block taxes online Form 1099-C, Cancellation of Debt Nancy's 2013 Form 1040 This image is too large to be displayed in the current screen. Hr block taxes online Please click the link to view the image. Hr block taxes online Form 1040, U. Hr block taxes online S. Hr block taxes online Individual Income Tax Nancy's Form 982 This image is too large to be displayed in the current screen. Hr block taxes online Please click the link to view the image. Hr block taxes online Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)              Example 2—Mortgage loan foreclosure. Hr block taxes online    In 2005, John and Mary Elm bought a main home for $335,000. Hr block taxes online John and Mary took out a $320,000 mortgage loan to buy the home and made a down payment of $15,000. Hr block taxes online The loan was secured by the home and is a recourse debt, meaning John and Mary are personally liable for the debt. Hr block taxes online   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. Hr block taxes online 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. Hr block taxes online   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. Hr block taxes online Identifiable event code "D" appears in box 6. Hr block taxes online This box shows the reason the creditor has filed Form 1099-C. Hr block taxes online 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. Hr block taxes online In this example, John and Mary meet both the insolvency and qualified principal residence indebtedness exclusions. Hr block taxes online Their sample Form 1099-C is shown on this page. Hr block taxes online   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). Hr block taxes online 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. Hr block taxes online   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). Hr block taxes online Instead, John and Mary check box 1e of Form 982 to exclude the canceled debt under the qualified principal residence exclusion. Hr block taxes online 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. Hr block taxes online As a result, John and Mary enter the full $25,000 of canceled debt on line 2 of Form 982. Hr block taxes online 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. Hr block taxes online Thus, John and Mary leave line 10b of Form 982 blank. Hr block taxes online   John and Mary must also determine whether they have a gain or loss from the foreclosure. Hr block taxes online John and Mary complete Table 1-1 (shown below) and find that they have a $45,000 loss from the foreclosure. Hr block taxes online Because this loss relates to their home, it is a nondeductible loss. Hr block taxes online   John and Mary's Form 1099-C, Insolvency Worksheet, and Form 982 follow. Hr block taxes online John and Mary's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Hr block taxes online Please click the link to view the image. Hr block taxes online Form 1099-C, Cancellation of Debt Table 1-1. Hr block taxes online Worksheet for Foreclosures and Repossessions (for John and Mary Elm) Part 1. Hr block taxes online Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). Hr block taxes online Otherwise, go to Part 2. Hr block taxes online 1. Hr block taxes online 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. Hr block taxes online 00 2. Hr block taxes online Enter the fair market value of the transferred property $290,000. Hr block taxes online 00 3. Hr block taxes online Ordinary income from the cancellation of debt upon foreclosure or repossession. Hr block taxes online * Subtract line 2 from line 1. Hr block taxes online If less than zero, enter zero. Hr block taxes online Next, go to Part 2 $ 25,000. Hr block taxes online 00 Part 2. Hr block taxes online Gain or loss from foreclosure or repossession. Hr block taxes online   4. Hr block taxes online Enter the smaller of line 1 or line 2. Hr block taxes online 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. Hr block taxes online 00 5. Hr block taxes online Enter any proceeds you received from the foreclosure sale   6. Hr block taxes online Add line 4 and line 5 $290,000. Hr block taxes online 00 7. Hr block taxes online Enter the adjusted basis of the transferred property $335,000. Hr block taxes online 00 8. Hr block taxes online Gain or loss from foreclosure or repossession. Hr block taxes online Subtract line 7 from line 6 ($ 45,000. Hr block taxes online 00) * The income may not be taxable. Hr block taxes online See chapter 1 for more details. Hr block taxes online Insolvency Worksheet—John and Mary Elm Date debt was canceled (mm/dd/yy) 03/01/13 Part I. Hr block taxes online 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. Hr block taxes online Credit card debt $ 5,500 2. Hr block taxes online 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. Hr block taxes online Car and other vehicle loans $ 4. Hr block taxes online Medical bills owed $ 5. Hr block taxes online Student loans $ 6. Hr block taxes online Accrued or past-due mortgage interest $ 7. Hr block taxes online Accrued or past-due real estate taxes $ 8. Hr block taxes online Accrued or past-due utilities (water, gas, electric) $ 9. Hr block taxes online Accrued or past-due child care costs $ 10. Hr block taxes online Federal or state income taxes remaining due (for prior tax years) $ 11. Hr block taxes online Judgments $ 12. Hr block taxes online Business debts (including those owed as a sole proprietor or partner) $ 13. Hr block taxes online Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. Hr block taxes online Other liabilities (debts) not included above $ 15. Hr block taxes online Total liabilities immediately before the cancellation. Hr block taxes online Add lines 1 through 14. Hr block taxes online $ 320,500 Part II. Hr block taxes online 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. Hr block taxes online Cash and bank account balances $ 6,000 17. Hr block taxes online 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. Hr block taxes online Cars and other vehicles $ 19. Hr block taxes online Computers $ 20. Hr block taxes online Household goods and furnishings (for example, appliances, electronics, furniture, etc. Hr block taxes online ) $ 21. Hr block taxes online Tools $ 22. Hr block taxes online Jewelry $ 23. Hr block taxes online Clothing $ 24. Hr block taxes online Books $ 25. Hr block taxes online Stocks and bonds $ 26. Hr block taxes online Investments in coins, stamps, paintings, or other collectibles $ 27. Hr block taxes online Firearms, sports, photographic, and other hobby equipment $ 28. Hr block taxes online Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 13,000 29. Hr block taxes online Interest in a pension plan $ 30. Hr block taxes online Interest in education accounts $ 31. Hr block taxes online Cash value of life insurance $ 32. Hr block taxes online Security deposits with landlords, utilities, and others $ 33. Hr block taxes online Interests in partnerships $ 34. Hr block taxes online Value of investment in a business $ 35. Hr block taxes online Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. Hr block taxes online Other assets not included above $ 37. Hr block taxes online FMV of total assets immediately before the cancellation. Hr block taxes online Add lines 16 through 36. Hr block taxes online $ 309,000 Part III. Hr block taxes online Insolvency 38. Hr block taxes online Amount of Insolvency. Hr block taxes online Subtract line 37 from line 15. Hr block taxes online If zero or less, you are not insolvent. Hr block taxes online $ 11,500 John and Mary's Form 982 This image is too large to be displayed in the current screen. Hr block taxes online Please click the link to view the image. Hr block taxes online 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. Hr block taxes online    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. Hr block taxes online 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. Hr block taxes online Kathy and Frank are personally liable for the mortgage loan, which is secured by the home. Hr block taxes online   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. Hr block taxes online The lender foreclosed on the property and, on December 5, 2013, sold the property to another buyer for $1,750,000. Hr block taxes online On December 26, 2013, the lender canceled the remaining debt. Hr block taxes online Kathy and Frank have no tax attributes other than basis of personal-use property. Hr block taxes online   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). Hr block taxes online Identifiable event code "D" appears in box 6. Hr block taxes online This box shows the reason the creditor has filed Form 1099-C. Hr block taxes online 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. Hr block taxes online Kathy and Frank are filing a joint return for 2013. Hr block taxes online   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. Hr block taxes online 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). Hr block taxes online 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. Hr block taxes online Because this loss relates to their home, it is a nondeductible loss. Hr block taxes online   Because the lender later canceled the remaining amount of the debt, Kathy and Frank must also determine whether that canceled debt is taxable. Hr block taxes online 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. Hr block taxes online Kathy and Frank also had the $750,000 remaining balance on the mortgage loan at that time. Hr block taxes online The household furnishings originally cost $30,000. Hr block taxes online The car had been fully paid off (so there was no related outstanding debt) and was originally purchased for $16,000. Hr block taxes online Kathy and Frank had no adjustments to the cost basis of the car. Hr block taxes online Kathy and Frank had no other assets or liabilities at the time of the cancellation. Hr block taxes online 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). Hr block taxes online   At the beginning of 2014, Kathy and Frank had $9,000 in their savings account and $15,000 in credit card debt. Hr block taxes online 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). Hr block taxes online Kathy and Frank had no other assets or liabilities at that time. Hr block taxes online Kathy and Frank no longer own the home because the lender foreclosed on it in 2013. Hr block taxes online   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. Hr block taxes online The maximum amount that Kathy and Frank can treat as qualified principal residence indebtedness is $2,000,000. Hr block taxes online 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. Hr block taxes online Because only a part of the loan is qualified principal residence indebtedness, Kathy and Frank must apply the ordering rule to the canceled debt. Hr block taxes online 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). Hr block taxes online 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. Hr block taxes online   Kathy and Frank do not elect to have the insolvency exclusion apply instead of the qualified principal residence exclusion. Hr block taxes online Nonetheless, they can still apply the insolvency exclusion to the $500,000 nonqualified debt because it is not qualified principal residence indebtedness. Hr block taxes online 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. Hr block taxes online 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). Hr block taxes online   Next, Kathy and Frank reduce their tax attributes using Part II of Form 982. Hr block taxes online 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. Hr block taxes online Thus, Kathy and Frank leave line 10b of Form 982 blank. Hr block taxes online However, Kathy and Frank are also excluding nonqualified debt under the insolvency exclusion. Hr block taxes online 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. Hr block taxes online 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). Hr block taxes online 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. Hr block taxes online Kathy and Frank reduce the basis in the car by $14,956. Hr block taxes online 52 ($43,000 x $16,000/$46,000). Hr block taxes online And they reduce the basis in the household furnishings by $28,043. Hr block taxes online 48 ($43,000 x $30,000/$46,000). Hr block taxes online   Following are Kathy and Frank's sample forms and worksheets. Hr block taxes online Frank and Kathy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Hr block taxes online Please click the link to view the image. Hr block taxes online Form 1099-C, Cancellation of Debt Table 1-1. Hr block taxes online Worksheet for Foreclosures and Repossessions (for Frank and Kathy Willow) Part 1. Hr block taxes online Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). Hr block taxes online Otherwise, go to Part 2. Hr block taxes online 1. Hr block taxes online 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. Hr block taxes online 00 2. Hr block taxes online Enter the fair market value of the transferred property $1,750,000. Hr block taxes online 00 3. Hr block taxes online Ordinary income from the cancellation of debt upon foreclosure or repossession. Hr block taxes online * Subtract line 2 from line 1. Hr block taxes online If less than zero, enter zero. Hr block taxes online Next, go to Part 2 $0. Hr block taxes online 00 Part 2. Hr block taxes online Gain or loss from foreclosure or repossession. Hr block taxes online   4. Hr block taxes online Enter the smaller of line 1 or line 2. Hr block taxes online 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. Hr block taxes online $1,750,000. Hr block taxes online 00 5. Hr block taxes online Enter any proceeds you received from the foreclosure sale   6. Hr block taxes online Add line 4 and line 5 $1,750,000. Hr block taxes online 00 7. Hr block taxes online Enter the adjusted basis of the transferred property $3,000,000. Hr block taxes online 00 8. Hr block taxes online Gain or loss from foreclosure or repossession. Hr block taxes online Subtract line 7 from line 6 ($1,250,000. Hr block taxes online 00) * The income may not be taxable. Hr block taxes online See chapter 1 for more details. Hr block taxes online    Insolvency Worksheet—Frank and Kathy Willow Date debt was canceled (mm/dd/yy) 12/26/13 Part I. Hr block taxes online 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. Hr block taxes online Credit card debt $ 18,000 2. Hr block taxes online 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. Hr block taxes online Car and other vehicle loans $ 4. Hr block taxes online Medical bills owed $ 5. Hr block taxes online Student loans $ 6. Hr block taxes online Accrued or past-due mortgage interest $ 7. Hr block taxes online Accrued or past-due real estate taxes $ 8. Hr block taxes online Accrued or past-due utilities (water, gas, electric) $ 9. Hr block taxes online Accrued or past-due child care costs $ 10. Hr block taxes online Federal or state income taxes remaining due (for prior tax years) $ 11. Hr block taxes online Judgments $ 12. Hr block taxes online Business debts (including those owed as a sole proprietor or partner) $ 13. Hr block taxes online Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. Hr block taxes online Other liabilities (debts) not included above $ 15. Hr block taxes online Total liabilities immediately before the cancellation. Hr block taxes online Add lines 1 through 14. Hr block taxes online $ 768,000 Part II. Hr block taxes online 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. Hr block taxes online Cash and bank account balances $ 15,000 17. Hr block taxes online 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. Hr block taxes online Cars and other vehicles $ 10,000 19. Hr block taxes online Computers $ 20. Hr block taxes online Household goods and furnishings (for example, appliances, electronics, furniture, etc. Hr block taxes online ) $ 17,000 21. Hr block taxes online Tools $ 22. Hr block taxes online Jewelry $ 23. Hr block taxes online Clothing $ 24. Hr block taxes online Books $ 25. Hr block taxes online Stocks and bonds $ 26. Hr block taxes online Investments in coins, stamps, paintings, or other collectibles $ 27. Hr block taxes online Firearms, sports, photographic, and other hobby equipment $ 28. Hr block taxes online Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 29. Hr block taxes online Interest in a pension plan $ 30. Hr block taxes online Interest in education accounts $ 31. Hr block taxes online Cash value of life insurance $ 32. Hr block taxes online Security deposits with landlords, utilities, and others $ 33. Hr block taxes online Interests in partnerships $ 34. Hr block taxes online Value of investment in a business $ 35. Hr block taxes online Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. Hr block taxes online Other assets not included above $ 37. Hr block taxes online FMV of total assets immediately before the cancellation. Hr block taxes online Add lines 16 through 36. Hr block taxes online $ 42,000 Part III. Hr block taxes online Insolvency 38. Hr block taxes online Amount of Insolvency. Hr block taxes online Subtract line 37 from line 15. Hr block taxes online If zero or less, you are not insolvent. Hr block taxes online $ 726,000    Frank and Kathy's Form 982 This image is too large to be displayed in the current screen. Hr block taxes online Please click the link to view the image. Hr block taxes online Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Prev  Up  Next   Home   More Online Publications