Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Irs 2012 Tax Form 1040

Filing 2007 Tax Return Late2012 Tax Software Downloads1040 Ez Online2012 Tax Forms OnlineAmending TaxesHow Do You Amend Tax Returns2012 Tax Return FilingIrs Form 1040x InstructionsEz 1040 OnlineForm 1040ez 2012Filing Extension For 2011Free Tax Filing2010 1040ez InstructionsIrs File1040 Ez TaxFree Federal Tax FilingAmending Tax ReturnsIrs Gov FormsFree 2012 Tax Software DownloadStudent Tax Form 1098 TFiling Amended Tax Return 201210401040nr FreeOnline 1040nrWhere To Get 2012 Tax FormsFile An Amended Tax Return For 2010Do I File Taxes Amend Previous YearsOnline Ez FormHow To Fill Out 1040xFree H&r Block MilitaryBack Tax DebtH&r Block 1040ezAmended 2009 Tax Return InstructionsAmending Tax ReturnsFree Income Tax Preparation2011 Tax Tables1040x Amended Tax FormFree State Tax FilingsPrint State Tax FormWww Freefilefillableforms Com

Irs 2012 Tax Form 1040

Irs 2012 tax form 1040 6. Irs 2012 tax form 1040   Estimated Tax Table of Contents Who Must Make Estimated Tax Payments Estimated tax is a method used to pay tax on income that is not subject to withholding. Irs 2012 tax form 1040 This income includes self-employment income, interest, dividends, alimony, rent, gains from the sale of assets, prizes, and awards. Irs 2012 tax form 1040 Income tax generally is withheld from pensions and annuity payments you receive. Irs 2012 tax form 1040 However, if the tax withheld from your pension (or other) income is not enough, you may have to pay estimated tax. Irs 2012 tax form 1040 If you do not pay enough tax through withholding, by making estimated tax payments, or both, you may be charged a penalty. Irs 2012 tax form 1040 Who Must Make Estimated Tax Payments If you had a tax liability for 2013, you may have to pay estimated tax for 2014. Irs 2012 tax form 1040 In most cases, you must pay estimated tax for 2014 if both of the following apply. Irs 2012 tax form 1040 You expect to owe at least $1,000 in tax for 2014, after subtracting your withholding and refundable credits. Irs 2012 tax form 1040 You expect your withholding and refundable credits to be less than the smaller of: 90% of the tax to be shown on your 2014 tax return, or 100% of the tax shown on your 2013 tax return. Irs 2012 tax form 1040 The 2013 tax return must cover all 12 months. Irs 2012 tax form 1040 If all of your income will be subject to income tax withholding, you probably do not need to make estimated tax payments. Irs 2012 tax form 1040 For more information on estimated tax, see Publication 505. Irs 2012 tax form 1040 Prev  Up  Next   Home   More Online Publications
Español

Buy from the Government

Find resources in buying from the government, through auctions and agencies.

The Irs 2012 Tax Form 1040

Irs 2012 tax form 1040 4. Irs 2012 tax form 1040   Detailed Examples Table of Contents These examples use actual forms to help you prepare your income tax return. Irs 2012 tax form 1040 However, the information shown on the filled-in forms is not from any actual person or scenario. Irs 2012 tax form 1040 Example 1—Mortgage loan modification. Irs 2012 tax form 1040    In 2007, Nancy Oak bought a main home for $435,000. Irs 2012 tax form 1040 Nancy took out a $420,000 mortgage loan to buy the home and made a down payment of $15,000. Irs 2012 tax form 1040 The loan was secured by the home. Irs 2012 tax form 1040 The mortgage loan was a recourse debt, meaning that Nancy was personally liable for the debt. Irs 2012 tax form 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. Irs 2012 tax form 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. Irs 2012 tax form 1040 The FMV of Nancy's home at the time of the refinancing was $500,000. Irs 2012 tax form 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. Irs 2012 tax form 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. Irs 2012 tax form 1040   In 2013, Nancy was unable to make her mortgage loan payments. Irs 2012 tax form 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. Irs 2012 tax form 1040 Nancy was neither insolvent nor in bankruptcy at the time of the loan modification. Irs 2012 tax form 1040   Nancy received a 2013 Form 1099-C from her bank in January 2014 showing canceled debt of $40,000 in box 2. Irs 2012 tax form 1040 Identifiable event code "F" appears in box 6. Irs 2012 tax form 1040 This box shows the reason the creditor has filed Form 1099-C. Irs 2012 tax form 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. Irs 2012 tax form 1040 Nancy determines that the only exception or exclusion that applies to her is the qualified principal residence indebtedness exclusion. Irs 2012 tax form 1040   Next, Nancy determines the amount, if any, of the $40,000 of canceled debt that was qualified principal residence indebtedness. Irs 2012 tax form 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. Irs 2012 tax form 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. Irs 2012 tax form 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). Irs 2012 tax form 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. Irs 2012 tax form 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). Irs 2012 tax form 1040 Nancy must also include the $35,000 nonqualified debt portion in income on Form 1040, line 21. Irs 2012 tax form 1040 You can see Nancy's Form 1099-C and a portion of her Form 1040 below. Irs 2012 tax form 1040 Nancy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Irs 2012 tax form 1040 Please click the link to view the image. Irs 2012 tax form 1040 Form 1099-C, Cancellation of Debt Nancy's 2013 Form 1040 This image is too large to be displayed in the current screen. Irs 2012 tax form 1040 Please click the link to view the image. Irs 2012 tax form 1040 Form 1040, U. Irs 2012 tax form 1040 S. Irs 2012 tax form 1040 Individual Income Tax Nancy's Form 982 This image is too large to be displayed in the current screen. Irs 2012 tax form 1040 Please click the link to view the image. Irs 2012 tax form 1040 Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)              Example 2—Mortgage loan foreclosure. Irs 2012 tax form 1040    In 2005, John and Mary Elm bought a main home for $335,000. Irs 2012 tax form 1040 John and Mary took out a $320,000 mortgage loan to buy the home and made a down payment of $15,000. Irs 2012 tax form 1040 The loan was secured by the home and is a recourse debt, meaning John and Mary are personally liable for the debt. Irs 2012 tax form 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. Irs 2012 tax form 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. Irs 2012 tax form 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. Irs 2012 tax form 1040 Identifiable event code "D" appears in box 6. Irs 2012 tax form 1040 This box shows the reason the creditor has filed Form 1099-C. Irs 2012 tax form 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. Irs 2012 tax form 1040 In this example, John and Mary meet both the insolvency and qualified principal residence indebtedness exclusions. Irs 2012 tax form 1040 Their sample Form 1099-C is shown on this page. Irs 2012 tax form 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). Irs 2012 tax form 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. Irs 2012 tax form 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). Irs 2012 tax form 1040 Instead, John and Mary check box 1e of Form 982 to exclude the canceled debt under the qualified principal residence exclusion. Irs 2012 tax form 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. Irs 2012 tax form 1040 As a result, John and Mary enter the full $25,000 of canceled debt on line 2 of Form 982. Irs 2012 tax form 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. Irs 2012 tax form 1040 Thus, John and Mary leave line 10b of Form 982 blank. Irs 2012 tax form 1040   John and Mary must also determine whether they have a gain or loss from the foreclosure. Irs 2012 tax form 1040 John and Mary complete Table 1-1 (shown below) and find that they have a $45,000 loss from the foreclosure. Irs 2012 tax form 1040 Because this loss relates to their home, it is a nondeductible loss. Irs 2012 tax form 1040   John and Mary's Form 1099-C, Insolvency Worksheet, and Form 982 follow. Irs 2012 tax form 1040 John and Mary's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Irs 2012 tax form 1040 Please click the link to view the image. Irs 2012 tax form 1040 Form 1099-C, Cancellation of Debt Table 1-1. Irs 2012 tax form 1040 Worksheet for Foreclosures and Repossessions (for John and Mary Elm) Part 1. Irs 2012 tax form 1040 Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). Irs 2012 tax form 1040 Otherwise, go to Part 2. Irs 2012 tax form 1040 1. Irs 2012 tax form 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. Irs 2012 tax form 1040 00 2. Irs 2012 tax form 1040 Enter the fair market value of the transferred property $290,000. Irs 2012 tax form 1040 00 3. Irs 2012 tax form 1040 Ordinary income from the cancellation of debt upon foreclosure or repossession. Irs 2012 tax form 1040 * Subtract line 2 from line 1. Irs 2012 tax form 1040 If less than zero, enter zero. Irs 2012 tax form 1040 Next, go to Part 2 $ 25,000. Irs 2012 tax form 1040 00 Part 2. Irs 2012 tax form 1040 Gain or loss from foreclosure or repossession. Irs 2012 tax form 1040   4. Irs 2012 tax form 1040 Enter the smaller of line 1 or line 2. Irs 2012 tax form 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. Irs 2012 tax form 1040 00 5. Irs 2012 tax form 1040 Enter any proceeds you received from the foreclosure sale   6. Irs 2012 tax form 1040 Add line 4 and line 5 $290,000. Irs 2012 tax form 1040 00 7. Irs 2012 tax form 1040 Enter the adjusted basis of the transferred property $335,000. Irs 2012 tax form 1040 00 8. Irs 2012 tax form 1040 Gain or loss from foreclosure or repossession. Irs 2012 tax form 1040 Subtract line 7 from line 6 ($ 45,000. Irs 2012 tax form 1040 00) * The income may not be taxable. Irs 2012 tax form 1040 See chapter 1 for more details. Irs 2012 tax form 1040 Insolvency Worksheet—John and Mary Elm Date debt was canceled (mm/dd/yy) 03/01/13 Part I. Irs 2012 tax form 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. Irs 2012 tax form 1040 Credit card debt $ 5,500 2. Irs 2012 tax form 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. Irs 2012 tax form 1040 Car and other vehicle loans $ 4. Irs 2012 tax form 1040 Medical bills owed $ 5. Irs 2012 tax form 1040 Student loans $ 6. Irs 2012 tax form 1040 Accrued or past-due mortgage interest $ 7. Irs 2012 tax form 1040 Accrued or past-due real estate taxes $ 8. Irs 2012 tax form 1040 Accrued or past-due utilities (water, gas, electric) $ 9. Irs 2012 tax form 1040 Accrued or past-due child care costs $ 10. Irs 2012 tax form 1040 Federal or state income taxes remaining due (for prior tax years) $ 11. Irs 2012 tax form 1040 Judgments $ 12. Irs 2012 tax form 1040 Business debts (including those owed as a sole proprietor or partner) $ 13. Irs 2012 tax form 1040 Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. Irs 2012 tax form 1040 Other liabilities (debts) not included above $ 15. Irs 2012 tax form 1040 Total liabilities immediately before the cancellation. Irs 2012 tax form 1040 Add lines 1 through 14. Irs 2012 tax form 1040 $ 320,500 Part II. Irs 2012 tax form 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. Irs 2012 tax form 1040 Cash and bank account balances $ 6,000 17. Irs 2012 tax form 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. Irs 2012 tax form 1040 Cars and other vehicles $ 19. Irs 2012 tax form 1040 Computers $ 20. Irs 2012 tax form 1040 Household goods and furnishings (for example, appliances, electronics, furniture, etc. Irs 2012 tax form 1040 ) $ 21. Irs 2012 tax form 1040 Tools $ 22. Irs 2012 tax form 1040 Jewelry $ 23. Irs 2012 tax form 1040 Clothing $ 24. Irs 2012 tax form 1040 Books $ 25. Irs 2012 tax form 1040 Stocks and bonds $ 26. Irs 2012 tax form 1040 Investments in coins, stamps, paintings, or other collectibles $ 27. Irs 2012 tax form 1040 Firearms, sports, photographic, and other hobby equipment $ 28. Irs 2012 tax form 1040 Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 13,000 29. Irs 2012 tax form 1040 Interest in a pension plan $ 30. Irs 2012 tax form 1040 Interest in education accounts $ 31. Irs 2012 tax form 1040 Cash value of life insurance $ 32. Irs 2012 tax form 1040 Security deposits with landlords, utilities, and others $ 33. Irs 2012 tax form 1040 Interests in partnerships $ 34. Irs 2012 tax form 1040 Value of investment in a business $ 35. Irs 2012 tax form 1040 Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. Irs 2012 tax form 1040 Other assets not included above $ 37. Irs 2012 tax form 1040 FMV of total assets immediately before the cancellation. Irs 2012 tax form 1040 Add lines 16 through 36. Irs 2012 tax form 1040 $ 309,000 Part III. Irs 2012 tax form 1040 Insolvency 38. Irs 2012 tax form 1040 Amount of Insolvency. Irs 2012 tax form 1040 Subtract line 37 from line 15. Irs 2012 tax form 1040 If zero or less, you are not insolvent. Irs 2012 tax form 1040 $ 11,500 John and Mary's Form 982 This image is too large to be displayed in the current screen. Irs 2012 tax form 1040 Please click the link to view the image. Irs 2012 tax form 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. Irs 2012 tax form 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. Irs 2012 tax form 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. Irs 2012 tax form 1040 Kathy and Frank are personally liable for the mortgage loan, which is secured by the home. Irs 2012 tax form 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. Irs 2012 tax form 1040 The lender foreclosed on the property and, on December 5, 2013, sold the property to another buyer for $1,750,000. Irs 2012 tax form 1040 On December 26, 2013, the lender canceled the remaining debt. Irs 2012 tax form 1040 Kathy and Frank have no tax attributes other than basis of personal-use property. Irs 2012 tax form 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). Irs 2012 tax form 1040 Identifiable event code "D" appears in box 6. Irs 2012 tax form 1040 This box shows the reason the creditor has filed Form 1099-C. Irs 2012 tax form 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. Irs 2012 tax form 1040 Kathy and Frank are filing a joint return for 2013. Irs 2012 tax form 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. Irs 2012 tax form 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). Irs 2012 tax form 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. Irs 2012 tax form 1040 Because this loss relates to their home, it is a nondeductible loss. Irs 2012 tax form 1040   Because the lender later canceled the remaining amount of the debt, Kathy and Frank must also determine whether that canceled debt is taxable. Irs 2012 tax form 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. Irs 2012 tax form 1040 Kathy and Frank also had the $750,000 remaining balance on the mortgage loan at that time. Irs 2012 tax form 1040 The household furnishings originally cost $30,000. Irs 2012 tax form 1040 The car had been fully paid off (so there was no related outstanding debt) and was originally purchased for $16,000. Irs 2012 tax form 1040 Kathy and Frank had no adjustments to the cost basis of the car. Irs 2012 tax form 1040 Kathy and Frank had no other assets or liabilities at the time of the cancellation. Irs 2012 tax form 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). Irs 2012 tax form 1040   At the beginning of 2014, Kathy and Frank had $9,000 in their savings account and $15,000 in credit card debt. Irs 2012 tax form 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). Irs 2012 tax form 1040 Kathy and Frank had no other assets or liabilities at that time. Irs 2012 tax form 1040 Kathy and Frank no longer own the home because the lender foreclosed on it in 2013. Irs 2012 tax form 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. Irs 2012 tax form 1040 The maximum amount that Kathy and Frank can treat as qualified principal residence indebtedness is $2,000,000. Irs 2012 tax form 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. Irs 2012 tax form 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. Irs 2012 tax form 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). Irs 2012 tax form 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. Irs 2012 tax form 1040   Kathy and Frank do not elect to have the insolvency exclusion apply instead of the qualified principal residence exclusion. Irs 2012 tax form 1040 Nonetheless, they can still apply the insolvency exclusion to the $500,000 nonqualified debt because it is not qualified principal residence indebtedness. Irs 2012 tax form 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. Irs 2012 tax form 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). Irs 2012 tax form 1040   Next, Kathy and Frank reduce their tax attributes using Part II of Form 982. Irs 2012 tax form 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. Irs 2012 tax form 1040 Thus, Kathy and Frank leave line 10b of Form 982 blank. Irs 2012 tax form 1040 However, Kathy and Frank are also excluding nonqualified debt under the insolvency exclusion. Irs 2012 tax form 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. Irs 2012 tax form 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). Irs 2012 tax form 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. Irs 2012 tax form 1040 Kathy and Frank reduce the basis in the car by $14,956. Irs 2012 tax form 1040 52 ($43,000 x $16,000/$46,000). Irs 2012 tax form 1040 And they reduce the basis in the household furnishings by $28,043. Irs 2012 tax form 1040 48 ($43,000 x $30,000/$46,000). Irs 2012 tax form 1040   Following are Kathy and Frank's sample forms and worksheets. Irs 2012 tax form 1040 Frank and Kathy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Irs 2012 tax form 1040 Please click the link to view the image. Irs 2012 tax form 1040 Form 1099-C, Cancellation of Debt Table 1-1. Irs 2012 tax form 1040 Worksheet for Foreclosures and Repossessions (for Frank and Kathy Willow) Part 1. Irs 2012 tax form 1040 Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). Irs 2012 tax form 1040 Otherwise, go to Part 2. Irs 2012 tax form 1040 1. Irs 2012 tax form 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. Irs 2012 tax form 1040 00 2. Irs 2012 tax form 1040 Enter the fair market value of the transferred property $1,750,000. Irs 2012 tax form 1040 00 3. Irs 2012 tax form 1040 Ordinary income from the cancellation of debt upon foreclosure or repossession. Irs 2012 tax form 1040 * Subtract line 2 from line 1. Irs 2012 tax form 1040 If less than zero, enter zero. Irs 2012 tax form 1040 Next, go to Part 2 $0. Irs 2012 tax form 1040 00 Part 2. Irs 2012 tax form 1040 Gain or loss from foreclosure or repossession. Irs 2012 tax form 1040   4. Irs 2012 tax form 1040 Enter the smaller of line 1 or line 2. Irs 2012 tax form 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. Irs 2012 tax form 1040 $1,750,000. Irs 2012 tax form 1040 00 5. Irs 2012 tax form 1040 Enter any proceeds you received from the foreclosure sale   6. Irs 2012 tax form 1040 Add line 4 and line 5 $1,750,000. Irs 2012 tax form 1040 00 7. Irs 2012 tax form 1040 Enter the adjusted basis of the transferred property $3,000,000. Irs 2012 tax form 1040 00 8. Irs 2012 tax form 1040 Gain or loss from foreclosure or repossession. Irs 2012 tax form 1040 Subtract line 7 from line 6 ($1,250,000. Irs 2012 tax form 1040 00) * The income may not be taxable. Irs 2012 tax form 1040 See chapter 1 for more details. Irs 2012 tax form 1040    Insolvency Worksheet—Frank and Kathy Willow Date debt was canceled (mm/dd/yy) 12/26/13 Part I. Irs 2012 tax form 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. Irs 2012 tax form 1040 Credit card debt $ 18,000 2. Irs 2012 tax form 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. Irs 2012 tax form 1040 Car and other vehicle loans $ 4. Irs 2012 tax form 1040 Medical bills owed $ 5. Irs 2012 tax form 1040 Student loans $ 6. Irs 2012 tax form 1040 Accrued or past-due mortgage interest $ 7. Irs 2012 tax form 1040 Accrued or past-due real estate taxes $ 8. Irs 2012 tax form 1040 Accrued or past-due utilities (water, gas, electric) $ 9. Irs 2012 tax form 1040 Accrued or past-due child care costs $ 10. Irs 2012 tax form 1040 Federal or state income taxes remaining due (for prior tax years) $ 11. Irs 2012 tax form 1040 Judgments $ 12. Irs 2012 tax form 1040 Business debts (including those owed as a sole proprietor or partner) $ 13. Irs 2012 tax form 1040 Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. Irs 2012 tax form 1040 Other liabilities (debts) not included above $ 15. Irs 2012 tax form 1040 Total liabilities immediately before the cancellation. Irs 2012 tax form 1040 Add lines 1 through 14. Irs 2012 tax form 1040 $ 768,000 Part II. Irs 2012 tax form 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. Irs 2012 tax form 1040 Cash and bank account balances $ 15,000 17. Irs 2012 tax form 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. Irs 2012 tax form 1040 Cars and other vehicles $ 10,000 19. Irs 2012 tax form 1040 Computers $ 20. Irs 2012 tax form 1040 Household goods and furnishings (for example, appliances, electronics, furniture, etc. Irs 2012 tax form 1040 ) $ 17,000 21. Irs 2012 tax form 1040 Tools $ 22. Irs 2012 tax form 1040 Jewelry $ 23. Irs 2012 tax form 1040 Clothing $ 24. Irs 2012 tax form 1040 Books $ 25. Irs 2012 tax form 1040 Stocks and bonds $ 26. Irs 2012 tax form 1040 Investments in coins, stamps, paintings, or other collectibles $ 27. Irs 2012 tax form 1040 Firearms, sports, photographic, and other hobby equipment $ 28. Irs 2012 tax form 1040 Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 29. Irs 2012 tax form 1040 Interest in a pension plan $ 30. Irs 2012 tax form 1040 Interest in education accounts $ 31. Irs 2012 tax form 1040 Cash value of life insurance $ 32. Irs 2012 tax form 1040 Security deposits with landlords, utilities, and others $ 33. Irs 2012 tax form 1040 Interests in partnerships $ 34. Irs 2012 tax form 1040 Value of investment in a business $ 35. Irs 2012 tax form 1040 Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. Irs 2012 tax form 1040 Other assets not included above $ 37. Irs 2012 tax form 1040 FMV of total assets immediately before the cancellation. Irs 2012 tax form 1040 Add lines 16 through 36. Irs 2012 tax form 1040 $ 42,000 Part III. Irs 2012 tax form 1040 Insolvency 38. Irs 2012 tax form 1040 Amount of Insolvency. Irs 2012 tax form 1040 Subtract line 37 from line 15. Irs 2012 tax form 1040 If zero or less, you are not insolvent. Irs 2012 tax form 1040 $ 726,000    Frank and Kathy's Form 982 This image is too large to be displayed in the current screen. Irs 2012 tax form 1040 Please click the link to view the image. Irs 2012 tax form 1040 Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Prev  Up  Next   Home   More Online Publications