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Timestamp: 2018-04-20 01:14:46
Document Index: 801400058

Matched Legal Cases: ['art 1', 'art 1', 'art 2', 'art 2', 'art 2', 'art 1']

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Irs free file fillable forms 2. Irs free file fillable forms Foreclosures and Repossessions Table of Contents Amount realized and ordinary income on a recourse debt. Irs free file fillable forms Amount realized on a nonrecourse debt. Irs free file fillable forms If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. Irs free file fillable forms The foreclosure or repossession is treated as a sale from which you may realize gain or loss. Irs free file fillable forms This is true even if you voluntarily return the property to the lender. Irs free file fillable forms If the outstanding loan balance was more than the FMV of the property and the lender cancels all or part of the remaining loan balance, you also may realize ordinary income from the cancellation of debt. Irs free file fillable forms You must report this income on your return unless certain exceptions or exclusions apply. Irs free file fillable forms See chapter 1 for more details. Irs free file fillable forms Borrower's gain or loss. Irs free file fillable forms You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale. Irs free file fillable forms The gain is the difference between the amount realized and your adjusted basis in the transferred property (amount realized minus adjusted basis). Irs free file fillable forms The loss is the difference between your adjusted basis in the transferred property and the amount realized (adjusted basis minus amount realized). Irs free file fillable forms For more information on figuring gain or loss from the sale of property, see Gain or Loss From Sales and Exchanges in Publication 544. Irs free file fillable forms You can use Table 1-1 to figure your ordinary income from the cancellation of debt and your gain or loss from a foreclosure or repossession. Irs free file fillable forms Amount realized and ordinary income on a recourse debt. Irs free file fillable forms If you are personally liable for the debt, the amount realized on the foreclosure or repossession includes the smaller of: The outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, or The FMV of the transferred property. Irs free file fillable forms The amount realized also includes any proceeds you received from the foreclosure sale. Irs free file fillable forms If the FMV of the transferred property is less than the total outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, the difference is ordinary income from the cancellation of debt. Irs free file fillable forms You must report this income on your return unless certain exceptions or exclusions apply. Irs free file fillable forms See chapter 1 for more details. Irs free file fillable forms Example 1. Irs free file fillable forms Tara bought a new car for $15,000. Irs free file fillable forms She made a $2,000 downpayment and borrowed the remaining $13,000 from the dealer's credit company. Irs free file fillable forms Tara is personally liable for the loan (recourse debt) and the car is pledged as security for the loan. Irs free file fillable forms On August 1, 2013, the credit company repossessed the car because Tara had stopped making loan payments. Irs free file fillable forms The balance due after taking into account the payments Tara made was $10,000. Irs free file fillable forms The FMV of the car when it was repossessed was $9,000. Irs free file fillable forms On November 15, 2013, the credit company forgave the remaining $1,000 balance on the loan due to insufficient assets. Irs free file fillable forms In this case, the amount Tara realizes is $9,000. Irs free file fillable forms This is the smaller of: The $10,000 outstanding debt immediately before the repossession reduced by the $1,000 for which she remains personally liable immediately after the repossession ($10,000 − $1,000 = $9,000), or The $9,000 FMV of the car. Irs free file fillable forms Tara figures her gain or loss on the repossession by comparing the $9,000 amount realized with her $15,000 adjusted basis. Irs free file fillable forms She has a $6,000 nondeductible loss. Irs free file fillable forms After the cancellation of the remaining balance on the loan in November, Tara also has ordinary income from cancellation of debt in the amount of $1,000 (the remaining balance on the $10,000 loan after the $9,000 amount satisfied by the FMV of the repossessed car). Irs free file fillable forms Tara must report this $1,000 on her return unless one of the exceptions or exclusions described in chapter 1 applies. Irs free file fillable forms Example 2. Irs free file fillable forms Lili paid $200,000 for her home. Irs free file fillable forms She made a $15,000 downpayment and borrowed the remaining $185,000 from a bank. Irs free file fillable forms Lili is personally liable for the mortgage loan and the house secures the loan. Irs free file fillable forms In 2013, the bank foreclosed on the mortgage because Lili stopped making payments. Irs free file fillable forms When the bank foreclosed the mortgage, the balance due was $180,000, the FMV of the house was $170,000, and Lili's adjusted basis was $175,000 due to a casualty loss she had deducted. Irs free file fillable forms At the time of the foreclosure, the bank forgave $2,000 of the $10,000 debt in excess of the FMV ($180,000 minus $170,000). Irs free file fillable forms She remained personally liable for the $8,000 balance. Irs free file fillable forms In this case, Lili has ordinary income from the cancellation of debt in the amount of $2,000. Irs free file fillable forms The $2,000 income from the cancellation of debt is figured by subtracting the $170,000 FMV of the house from the $172,000 difference between her total outstanding debt immediately before the transfer of property and the amount for which she remains personally liable immediately after the transfer ($180,000 minus $8,000). Irs free file fillable forms She is able to exclude the $2,000 of canceled debt from her income under the qualified principal residence indebtedness rules discussed earlier. Irs free file fillable forms Lili must also determine her gain or loss from the foreclosure. Irs free file fillable forms In this case, the amount that she realizes is $170,000. Irs free file fillable forms This is the smaller of: (a) the $180,000 outstanding debt immediately before the transfer reduced by the $8,000 for which she remains personally liable immediately after the transfer ($180,000 − $8,000 = $172,000) or (b) the $170,000 FMV of the house. Irs free file fillable forms Lili figures her gain or loss on the foreclosure by comparing the $170,000 amount realized with her $175,000 adjusted basis. Irs free file fillable forms She has a $5,000 nondeductible loss. Irs free file fillable forms Table 1-1. Irs free file fillable forms Worksheet for Foreclosures and Repossessions Part 1. Irs free file fillable forms Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). Irs free file fillable forms Otherwise, go to Part 2. Irs free file fillable forms 1. Irs free file fillable forms 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 2. Irs free file fillable forms Enter the fair market value of the transferred property 3. Irs free file fillable forms Ordinary income from the cancellation of debt upon foreclosure or repossession. Irs free file fillable forms * Subtract line 2 from line 1. Irs free file fillable forms If less than zero, enter zero. Irs free file fillable forms Next, go to Part 2 Part 2. Irs free file fillable forms Gain or loss from foreclosure or repossession. Irs free file fillable forms 4. Irs free file fillable forms Enter the smaller of line 1 or line 2. Irs free file fillable forms 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 5. Irs free file fillable forms Enter any proceeds you received from the foreclosure sale 6. Irs free file fillable forms Add line 4 and line 5 7. Irs free file fillable forms Enter the adjusted basis of the transferred property 8. Irs free file fillable forms Gain or loss from foreclosure or repossession. Irs free file fillable forms Subtract line 7 from line 6 * The income may not be taxable. Irs free file fillable forms See chapter 1 for more details. Irs free file fillable forms Amount realized on a nonrecourse debt. Irs free file fillable forms If you are not personally liable for repaying the debt secured by the transferred property, the amount you realize includes the full amount of the outstanding debt immediately before the transfer. Irs free file fillable forms This is true even if the FMV of the property is less than the outstanding debt immediately before the transfer. Irs free file fillable forms Example 1. Irs free file fillable forms Tara bought a new car for $15,000. Irs free file fillable forms She made a $2,000 downpayment and borrowed the remaining $13,000 from the dealer's credit company. Irs free file fillable forms Tara is not personally liable for the loan (nonrecourse), but pledged the new car as security for the loan. Irs free file fillable forms On August 1, 2013, the credit company repossessed the car because Tara had stopped making loan payments. Irs free file fillable forms The balance due after taking into account the payments Tara made was $10,000. Irs free file fillable forms The FMV of the car when it was repossessed was $9,000. Irs free file fillable forms The amount Tara realized on the repossession is $10,000. Irs free file fillable forms That is the outstanding amount of debt immediately before the repossession, even though the FMV of the car is less than $10,000. Irs free file fillable forms Tara figures her gain or loss on the repossession by comparing the $10,000 amount realized with her $15,000 adjusted basis. Irs free file fillable forms Tara has a $5,000 nondeductible loss. Irs free file fillable forms Example 2. Irs free file fillable forms Lili paid $200,000 for her home. Irs free file fillable forms She made a $15,000 downpayment and borrowed the remaining $185,000 from a bank. Irs free file fillable forms She is not personally liable for the loan, but grants the bank a mortgage. Irs free file fillable forms The bank foreclosed on the mortgage because Lili stopped making payments. Irs free file fillable forms When the bank foreclosed on the mortgage, the balance due was $180,000, the FMV of the house was $170,000, and Lili's adjusted basis was $175,000 due to a casualty loss she had deducted. Irs free file fillable forms The amount Lili realized on the foreclosure is $180,000, the outstanding debt immediately before the foreclosure. Irs free file fillable forms She figures her gain or loss by comparing the $180,000 amount realized with her $175,000 adjusted basis. Irs free file fillable forms Lili has a $5,000 realized gain. Irs free file fillable forms See Publication 523 to figure and report any taxable amount. Irs free file fillable forms Forms 1099-A and 1099-C. Irs free file fillable forms A lender who acquires an interest in your property in a foreclosure or repossession should send you Form 1099-A, Acquisition or Abandonment of Secured Property, showing information you need to figure your gain or loss. Irs free file fillable forms However, if the lender also cancels part of your debt and must file Form 1099-C, the lender can include the information about the foreclosure or repossession on that form instead of on Form 1099-A. Irs free file fillable forms The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. Irs free file fillable forms For foreclosures or repossessions occurring in 2013, these forms should be sent to you by January 31, 2014. Irs free file fillable forms Prev Up Next Home More Online Publications	Skip Navigation
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