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

1040a Tax Form 2011

Free E File Federal And State Tax ReturnE File 2009 Tax ReturnBack Tax Relief2013 Tax Form 1040ezH And R Free Tax1040 NrIrs Form 1040x 2010How To File 2011 Taxes OnlineIrs E File 20121040ez Free OnlineH & R Block2012 Tax Return Online FreeFile 2010 Taxes Online Turbotax540ez Form2011 Tax Form 1040ezFederal Tax Return FormsWhere Can I File State Taxes Free OnlineHow To File A 2011 Tax Return For Free1040ez 2011 OnlineIrs 1040ez 2012Tax Amendment Form 1040xIrs 2012 1040 Tax FormWww.1040ez.comIncome Tax FormsCan I File 1040x Online1040aTax 1040 EzFile Taxes Online Free Federal And StateH&r Block Free File2012 1040a Tax FormWww Hrblock ComNew FolderFree State Tax Efile For Low IncomeFiling 1040ezHow Do I File An Amended Tax ReturnFree Turbotax 2012Www H And R Block ComDownload Tax Forms 2011Free Online Tax Filing 2011File State Return

1040a Tax Form 2011

1040a tax form 2011 Index A Adjusted basis: Adoption tax benefits, Adoption Tax Benefits Assessment for local improvements, Assessments for Local Improvements Canceled debt, Canceled Debt Excluded From Income Casualty and theft losses, Casualties and Thefts Credit for qualified electric vehicles, Vehicle Credits Decreases to, Decreases to Basis Depreciation, Depreciation Easements, Easements Employer-provided child care, Employer-Provided Child Care Example, Adjustments to Basis Example Gain from sale of home, Postponed Gain From Sale of Home Gas-guzzler tax, Gas-Guzzler Tax Increases to, Increases to Basis Section 179 deduction, Section 179 Deduction Subsidies for energy conservation, Exclusion of Subsidies for Energy Conservation Measures Adoption tax benefits, Adoption Tax Benefits Allocating basis, Allocating the Basis Assistance (see Tax help) Assumption of mortgage, Assumption of mortgage. 1040a tax form 2011 B Business acquired, Trade or Business Acquired Business assets, Business Assets Businesses exchanged, Exchange of business property. 1040a tax form 2011 C Canceled debt, Canceled Debt Excluded From Income Casualty and theft losses, Casualties and Thefts Change to business use, Property Changed to Business or Rental Use Community property, Community Property Constructing assets, Constructing assets. 1040a tax form 2011 Copyrights, Copyrights. 1040a tax form 2011 Cost basis: Allocating basis, Allocating the Basis Assumption of mortgage, Assumption of mortgage. 1040a tax form 2011 Capitalized costs, Activities subject to the rules. 1040a tax form 2011 , Deducting vs. 1040a tax form 2011 Capitalizing Costs Loans, low or no interest, Loans with low or no interest. 1040a tax form 2011 Real estate taxes, Real estate taxes. 1040a tax form 2011 Real property, Real Property Settlement costs (fees), Settlement costs. 1040a tax form 2011 D Decreases to basis, Decreases to Basis Demolition of building, Demolition of building. 1040a tax form 2011 Depreciation, Depreciation E Easements, Easements Employer-provided child care, Employer-Provided Child Care Exchanges: Involuntary, Involuntary Conversions Like-kind, Like-Kind Exchanges Nontaxable, Nontaxable Exchanges Partial business use of property, Partial Business Use of Property Taxable, Taxable Exchanges F Fair market value, Fair market value (FMV). 1040a tax form 2011 Franchises, Franchises, trademarks, and trade names. 1040a tax form 2011 Free tax services, How To Get Tax Help G Gain from sale of home, Postponed Gain From Sale of Home Gifts, property received, Property Received as a Gift Group of assets acquired, Group of Assets Acquired H Help (see Tax help) I Inherited property, Inherited Property Intangible assets, Intangible Assets Involuntary exchanges, Involuntary Conversions L Land and buildings, Land and Buildings Loans, low or no interest, Loans with low or no interest. 1040a tax form 2011 M More information (see Tax help) N Nontaxable exchanges: Like-kind, Like-Kind Exchanges Partial, Partially Nontaxable Exchange P Partially nontaxable exchanges, Partially Nontaxable Exchange Patents, Patents. 1040a tax form 2011 Points, Points. 1040a tax form 2011 Property changed to business use, Property Changed to Business or Rental Use Property received as a gift, Property Received as a Gift Property received for services: Bargain purchases, Bargain Purchases Fair market value, Property Received for Services Restricted property, Restricted Property Property transferred from a spouse, Property Transferred From a Spouse Publications (see Tax help) R Real estate taxes, Real estate taxes. 1040a tax form 2011 Real property, Real Property S Settlement costs (fees), Settlement costs. 1040a tax form 2011 Special-use valuation, Special-use valuation. 1040a tax form 2011 Spouse, property transferred from, Property Transferred From a Spouse Stocks and bonds, Stocks and Bonds Subdivided lots, Subdivided lots. 1040a tax form 2011 T Tax help, How To Get Tax Help Taxable exchanges, Taxable Exchanges Taxpayer Advocate, Contacting your Taxpayer Advocate. 1040a tax form 2011 Trade or business acquired, Trade or Business Acquired Trademarks and trade  names, Franchises, trademarks, and trade names. 1040a tax form 2011 Trading property (see Exchanges), Taxable Exchanges TTY/TDD information, How To Get Tax Help U Uniform capitalization rules: Activities subject to the rules, Activities subject to the rules. 1040a tax form 2011 Exceptions, Exceptions. 1040a tax form 2011 Prev  Up     Home   More Online Publications

Topic 303 - Checklist of Common Errors When Preparing Your Tax Return

Before filing your return, review it to make sure it is correct and complete. The following checklist may help you to avoid common errors:

  • Did you consider filing your tax return electronically? By electronically filing your tax return, many common errors may be avoided or corrected by the computer software. Depending on your income, you may even qualify to e-file for free by using Free File tax software. For more information, visit the IRS website at www.irs.gov and click on the e-file logo on our home page.
  • Did you clearly print your name, social security number, and address, including ZIP code directly on your return? Note that if you are married but filing a separate return, do not include your spouse's name in the name, address and social security number fields on the return.
  • Did you enter the names and social security numbers for yourself, your spouse (if filing jointly), your dependents, and qualifying children for the earned income credit or child tax credit, exactly as those names and numbers appear on each person's social security card? If there have been any name changes be sure to contact the Social Security Administration at www.ssa.gov or call at 800-772-1213.
  • Did you check only one filing status?
  • Did you check the appropriate exemption boxes and enter the names and social security numbers exactly as those names and numbers appear on each person's social security card, for all dependents you claimed? Is the total number of exemptions entered?
  • Did you enter income, deductions, and credits on the correct lines and are the totals correct?
  • If you show a negative amount on your return, did you put brackets around it?
  • If you are taking the standard deduction and checked any box indicating either you or your spouse were age 65 or older or blind, did you find the correct standard deduction using the chart in the Form 1040 Instructions (PDF) or the Form 1040A Instructions (PDF)?
  • Did you figure the tax correctly? If you used the tax tables, did you use the correct column for your filing status?
  • Did you sign and date the return? If it is a joint return, did your spouse also sign and date the return?
  • Do you have a Form W-2 (PDF) from each of your employers and did you attach Copy B of each Form W-2 to your return? If you have more than one job, combine the wages and withholdings from all Form W-2s you receive and report those amounts on one return.
  • Did you attach each Form 1099-R (PDF) that shows federal tax was withheld?
  • Did you attach all other necessary schedules and forms in sequence number order as shown in the upper right-hand corner?
  • Did you use the correct mailing address from your tax form instructions?
  • Did you use a postage stamp on the envelope?
  • If you owe tax, did you enclose a check or money order made payable to the "United States Treasury" with the return and include your name, address, social security number, daytime telephone number, tax form, and tax year on the payment? For additional information, refer to Topic 158.
  • If you are due a refund and requested direct deposit, did you check your financial institution's routing and account numbers?
  • Did you make a copy of the signed return and all schedules for your records?

A few of the most common errors are:

  1. Incorrect or missing social security numbers.
  2. Incorrect tax entered based on taxable income and filing status.
  3. Computation errors in figuring the taxable income, withholding and estimated tax payments, earned income credit, standard deduction for age 65 or over or blind, the taxable amount of social security benefits, and child and dependent care credit. Also, missing or incorrect identification numbers for child care providers.
  4. Withholding and estimated tax payments entered on the wrong line.
  5. Math errors, both addition and subtraction.

It is important that you review your entire return because any errors may delay the processing of your return.

Page Last Reviewed or Updated: January 22, 2014

The 1040a Tax Form 2011

1040a tax form 2011 4. 1040a tax form 2011   Detailed Examples Table of Contents These examples use actual forms to help you prepare your income tax return. 1040a tax form 2011 However, the information shown on the filled-in forms is not from any actual person or scenario. 1040a tax form 2011 Example 1—Mortgage loan modification. 1040a tax form 2011    In 2007, Nancy Oak bought a main home for $435,000. 1040a tax form 2011 Nancy took out a $420,000 mortgage loan to buy the home and made a down payment of $15,000. 1040a tax form 2011 The loan was secured by the home. 1040a tax form 2011 The mortgage loan was a recourse debt, meaning that Nancy was personally liable for the debt. 1040a tax form 2011 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. 1040a tax form 2011    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. 1040a tax form 2011 The FMV of Nancy's home at the time of the refinancing was $500,000. 1040a tax form 2011 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. 1040a tax form 2011 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. 1040a tax form 2011   In 2013, Nancy was unable to make her mortgage loan payments. 1040a tax form 2011 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. 1040a tax form 2011 Nancy was neither insolvent nor in bankruptcy at the time of the loan modification. 1040a tax form 2011   Nancy received a 2013 Form 1099-C from her bank in January 2014 showing canceled debt of $40,000 in box 2. 1040a tax form 2011 Identifiable event code "F" appears in box 6. 1040a tax form 2011 This box shows the reason the creditor has filed Form 1099-C. 1040a tax form 2011 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. 1040a tax form 2011 Nancy determines that the only exception or exclusion that applies to her is the qualified principal residence indebtedness exclusion. 1040a tax form 2011   Next, Nancy determines the amount, if any, of the $40,000 of canceled debt that was qualified principal residence indebtedness. 1040a tax form 2011 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. 1040a tax form 2011 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. 1040a tax form 2011 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). 1040a tax form 2011   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. 1040a tax form 2011 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). 1040a tax form 2011 Nancy must also include the $35,000 nonqualified debt portion in income on Form 1040, line 21. 1040a tax form 2011 You can see Nancy's Form 1099-C and a portion of her Form 1040 below. 1040a tax form 2011 Nancy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. 1040a tax form 2011 Please click the link to view the image. 1040a tax form 2011 Form 1099-C, Cancellation of Debt Nancy's 2013 Form 1040 This image is too large to be displayed in the current screen. 1040a tax form 2011 Please click the link to view the image. 1040a tax form 2011 Form 1040, U. 1040a tax form 2011 S. 1040a tax form 2011 Individual Income Tax Nancy's Form 982 This image is too large to be displayed in the current screen. 1040a tax form 2011 Please click the link to view the image. 1040a tax form 2011 Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)              Example 2—Mortgage loan foreclosure. 1040a tax form 2011    In 2005, John and Mary Elm bought a main home for $335,000. 1040a tax form 2011 John and Mary took out a $320,000 mortgage loan to buy the home and made a down payment of $15,000. 1040a tax form 2011 The loan was secured by the home and is a recourse debt, meaning John and Mary are personally liable for the debt. 1040a tax form 2011   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. 1040a tax form 2011 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. 1040a tax form 2011   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. 1040a tax form 2011 Identifiable event code "D" appears in box 6. 1040a tax form 2011 This box shows the reason the creditor has filed Form 1099-C. 1040a tax form 2011 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. 1040a tax form 2011 In this example, John and Mary meet both the insolvency and qualified principal residence indebtedness exclusions. 1040a tax form 2011 Their sample Form 1099-C is shown on this page. 1040a tax form 2011   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). 1040a tax form 2011 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. 1040a tax form 2011   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). 1040a tax form 2011 Instead, John and Mary check box 1e of Form 982 to exclude the canceled debt under the qualified principal residence exclusion. 1040a tax form 2011 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. 1040a tax form 2011 As a result, John and Mary enter the full $25,000 of canceled debt on line 2 of Form 982. 1040a tax form 2011 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. 1040a tax form 2011 Thus, John and Mary leave line 10b of Form 982 blank. 1040a tax form 2011   John and Mary must also determine whether they have a gain or loss from the foreclosure. 1040a tax form 2011 John and Mary complete Table 1-1 (shown below) and find that they have a $45,000 loss from the foreclosure. 1040a tax form 2011 Because this loss relates to their home, it is a nondeductible loss. 1040a tax form 2011   John and Mary's Form 1099-C, Insolvency Worksheet, and Form 982 follow. 1040a tax form 2011 John and Mary's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. 1040a tax form 2011 Please click the link to view the image. 1040a tax form 2011 Form 1099-C, Cancellation of Debt Table 1-1. 1040a tax form 2011 Worksheet for Foreclosures and Repossessions (for John and Mary Elm) Part 1. 1040a tax form 2011 Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). 1040a tax form 2011 Otherwise, go to Part 2. 1040a tax form 2011 1. 1040a tax form 2011 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. 1040a tax form 2011 00 2. 1040a tax form 2011 Enter the fair market value of the transferred property $290,000. 1040a tax form 2011 00 3. 1040a tax form 2011 Ordinary income from the cancellation of debt upon foreclosure or repossession. 1040a tax form 2011 * Subtract line 2 from line 1. 1040a tax form 2011 If less than zero, enter zero. 1040a tax form 2011 Next, go to Part 2 $ 25,000. 1040a tax form 2011 00 Part 2. 1040a tax form 2011 Gain or loss from foreclosure or repossession. 1040a tax form 2011   4. 1040a tax form 2011 Enter the smaller of line 1 or line 2. 1040a tax form 2011 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. 1040a tax form 2011 00 5. 1040a tax form 2011 Enter any proceeds you received from the foreclosure sale   6. 1040a tax form 2011 Add line 4 and line 5 $290,000. 1040a tax form 2011 00 7. 1040a tax form 2011 Enter the adjusted basis of the transferred property $335,000. 1040a tax form 2011 00 8. 1040a tax form 2011 Gain or loss from foreclosure or repossession. 1040a tax form 2011 Subtract line 7 from line 6 ($ 45,000. 1040a tax form 2011 00) * The income may not be taxable. 1040a tax form 2011 See chapter 1 for more details. 1040a tax form 2011 Insolvency Worksheet—John and Mary Elm Date debt was canceled (mm/dd/yy) 03/01/13 Part I. 1040a tax form 2011 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. 1040a tax form 2011 Credit card debt $ 5,500 2. 1040a tax form 2011 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. 1040a tax form 2011 Car and other vehicle loans $ 4. 1040a tax form 2011 Medical bills owed $ 5. 1040a tax form 2011 Student loans $ 6. 1040a tax form 2011 Accrued or past-due mortgage interest $ 7. 1040a tax form 2011 Accrued or past-due real estate taxes $ 8. 1040a tax form 2011 Accrued or past-due utilities (water, gas, electric) $ 9. 1040a tax form 2011 Accrued or past-due child care costs $ 10. 1040a tax form 2011 Federal or state income taxes remaining due (for prior tax years) $ 11. 1040a tax form 2011 Judgments $ 12. 1040a tax form 2011 Business debts (including those owed as a sole proprietor or partner) $ 13. 1040a tax form 2011 Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. 1040a tax form 2011 Other liabilities (debts) not included above $ 15. 1040a tax form 2011 Total liabilities immediately before the cancellation. 1040a tax form 2011 Add lines 1 through 14. 1040a tax form 2011 $ 320,500 Part II. 1040a tax form 2011 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. 1040a tax form 2011 Cash and bank account balances $ 6,000 17. 1040a tax form 2011 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. 1040a tax form 2011 Cars and other vehicles $ 19. 1040a tax form 2011 Computers $ 20. 1040a tax form 2011 Household goods and furnishings (for example, appliances, electronics, furniture, etc. 1040a tax form 2011 ) $ 21. 1040a tax form 2011 Tools $ 22. 1040a tax form 2011 Jewelry $ 23. 1040a tax form 2011 Clothing $ 24. 1040a tax form 2011 Books $ 25. 1040a tax form 2011 Stocks and bonds $ 26. 1040a tax form 2011 Investments in coins, stamps, paintings, or other collectibles $ 27. 1040a tax form 2011 Firearms, sports, photographic, and other hobby equipment $ 28. 1040a tax form 2011 Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 13,000 29. 1040a tax form 2011 Interest in a pension plan $ 30. 1040a tax form 2011 Interest in education accounts $ 31. 1040a tax form 2011 Cash value of life insurance $ 32. 1040a tax form 2011 Security deposits with landlords, utilities, and others $ 33. 1040a tax form 2011 Interests in partnerships $ 34. 1040a tax form 2011 Value of investment in a business $ 35. 1040a tax form 2011 Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. 1040a tax form 2011 Other assets not included above $ 37. 1040a tax form 2011 FMV of total assets immediately before the cancellation. 1040a tax form 2011 Add lines 16 through 36. 1040a tax form 2011 $ 309,000 Part III. 1040a tax form 2011 Insolvency 38. 1040a tax form 2011 Amount of Insolvency. 1040a tax form 2011 Subtract line 37 from line 15. 1040a tax form 2011 If zero or less, you are not insolvent. 1040a tax form 2011 $ 11,500 John and Mary's Form 982 This image is too large to be displayed in the current screen. 1040a tax form 2011 Please click the link to view the image. 1040a tax form 2011 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. 1040a tax form 2011    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. 1040a tax form 2011 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. 1040a tax form 2011 Kathy and Frank are personally liable for the mortgage loan, which is secured by the home. 1040a tax form 2011   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. 1040a tax form 2011 The lender foreclosed on the property and, on December 5, 2013, sold the property to another buyer for $1,750,000. 1040a tax form 2011 On December 26, 2013, the lender canceled the remaining debt. 1040a tax form 2011 Kathy and Frank have no tax attributes other than basis of personal-use property. 1040a tax form 2011   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). 1040a tax form 2011 Identifiable event code "D" appears in box 6. 1040a tax form 2011 This box shows the reason the creditor has filed Form 1099-C. 1040a tax form 2011 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. 1040a tax form 2011 Kathy and Frank are filing a joint return for 2013. 1040a tax form 2011   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. 1040a tax form 2011 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). 1040a tax form 2011 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. 1040a tax form 2011 Because this loss relates to their home, it is a nondeductible loss. 1040a tax form 2011   Because the lender later canceled the remaining amount of the debt, Kathy and Frank must also determine whether that canceled debt is taxable. 1040a tax form 2011 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. 1040a tax form 2011 Kathy and Frank also had the $750,000 remaining balance on the mortgage loan at that time. 1040a tax form 2011 The household furnishings originally cost $30,000. 1040a tax form 2011 The car had been fully paid off (so there was no related outstanding debt) and was originally purchased for $16,000. 1040a tax form 2011 Kathy and Frank had no adjustments to the cost basis of the car. 1040a tax form 2011 Kathy and Frank had no other assets or liabilities at the time of the cancellation. 1040a tax form 2011 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). 1040a tax form 2011   At the beginning of 2014, Kathy and Frank had $9,000 in their savings account and $15,000 in credit card debt. 1040a tax form 2011 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). 1040a tax form 2011 Kathy and Frank had no other assets or liabilities at that time. 1040a tax form 2011 Kathy and Frank no longer own the home because the lender foreclosed on it in 2013. 1040a tax form 2011   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. 1040a tax form 2011 The maximum amount that Kathy and Frank can treat as qualified principal residence indebtedness is $2,000,000. 1040a tax form 2011 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. 1040a tax form 2011 Because only a part of the loan is qualified principal residence indebtedness, Kathy and Frank must apply the ordering rule to the canceled debt. 1040a tax form 2011 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). 1040a tax form 2011 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. 1040a tax form 2011   Kathy and Frank do not elect to have the insolvency exclusion apply instead of the qualified principal residence exclusion. 1040a tax form 2011 Nonetheless, they can still apply the insolvency exclusion to the $500,000 nonqualified debt because it is not qualified principal residence indebtedness. 1040a tax form 2011 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. 1040a tax form 2011 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). 1040a tax form 2011   Next, Kathy and Frank reduce their tax attributes using Part II of Form 982. 1040a tax form 2011 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. 1040a tax form 2011 Thus, Kathy and Frank leave line 10b of Form 982 blank. 1040a tax form 2011 However, Kathy and Frank are also excluding nonqualified debt under the insolvency exclusion. 1040a tax form 2011 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. 1040a tax form 2011 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). 1040a tax form 2011 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. 1040a tax form 2011 Kathy and Frank reduce the basis in the car by $14,956. 1040a tax form 2011 52 ($43,000 x $16,000/$46,000). 1040a tax form 2011 And they reduce the basis in the household furnishings by $28,043. 1040a tax form 2011 48 ($43,000 x $30,000/$46,000). 1040a tax form 2011   Following are Kathy and Frank's sample forms and worksheets. 1040a tax form 2011 Frank and Kathy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. 1040a tax form 2011 Please click the link to view the image. 1040a tax form 2011 Form 1099-C, Cancellation of Debt Table 1-1. 1040a tax form 2011 Worksheet for Foreclosures and Repossessions (for Frank and Kathy Willow) Part 1. 1040a tax form 2011 Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). 1040a tax form 2011 Otherwise, go to Part 2. 1040a tax form 2011 1. 1040a tax form 2011 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. 1040a tax form 2011 00 2. 1040a tax form 2011 Enter the fair market value of the transferred property $1,750,000. 1040a tax form 2011 00 3. 1040a tax form 2011 Ordinary income from the cancellation of debt upon foreclosure or repossession. 1040a tax form 2011 * Subtract line 2 from line 1. 1040a tax form 2011 If less than zero, enter zero. 1040a tax form 2011 Next, go to Part 2 $0. 1040a tax form 2011 00 Part 2. 1040a tax form 2011 Gain or loss from foreclosure or repossession. 1040a tax form 2011   4. 1040a tax form 2011 Enter the smaller of line 1 or line 2. 1040a tax form 2011 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. 1040a tax form 2011 $1,750,000. 1040a tax form 2011 00 5. 1040a tax form 2011 Enter any proceeds you received from the foreclosure sale   6. 1040a tax form 2011 Add line 4 and line 5 $1,750,000. 1040a tax form 2011 00 7. 1040a tax form 2011 Enter the adjusted basis of the transferred property $3,000,000. 1040a tax form 2011 00 8. 1040a tax form 2011 Gain or loss from foreclosure or repossession. 1040a tax form 2011 Subtract line 7 from line 6 ($1,250,000. 1040a tax form 2011 00) * The income may not be taxable. 1040a tax form 2011 See chapter 1 for more details. 1040a tax form 2011    Insolvency Worksheet—Frank and Kathy Willow Date debt was canceled (mm/dd/yy) 12/26/13 Part I. 1040a tax form 2011 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. 1040a tax form 2011 Credit card debt $ 18,000 2. 1040a tax form 2011 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. 1040a tax form 2011 Car and other vehicle loans $ 4. 1040a tax form 2011 Medical bills owed $ 5. 1040a tax form 2011 Student loans $ 6. 1040a tax form 2011 Accrued or past-due mortgage interest $ 7. 1040a tax form 2011 Accrued or past-due real estate taxes $ 8. 1040a tax form 2011 Accrued or past-due utilities (water, gas, electric) $ 9. 1040a tax form 2011 Accrued or past-due child care costs $ 10. 1040a tax form 2011 Federal or state income taxes remaining due (for prior tax years) $ 11. 1040a tax form 2011 Judgments $ 12. 1040a tax form 2011 Business debts (including those owed as a sole proprietor or partner) $ 13. 1040a tax form 2011 Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. 1040a tax form 2011 Other liabilities (debts) not included above $ 15. 1040a tax form 2011 Total liabilities immediately before the cancellation. 1040a tax form 2011 Add lines 1 through 14. 1040a tax form 2011 $ 768,000 Part II. 1040a tax form 2011 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. 1040a tax form 2011 Cash and bank account balances $ 15,000 17. 1040a tax form 2011 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. 1040a tax form 2011 Cars and other vehicles $ 10,000 19. 1040a tax form 2011 Computers $ 20. 1040a tax form 2011 Household goods and furnishings (for example, appliances, electronics, furniture, etc. 1040a tax form 2011 ) $ 17,000 21. 1040a tax form 2011 Tools $ 22. 1040a tax form 2011 Jewelry $ 23. 1040a tax form 2011 Clothing $ 24. 1040a tax form 2011 Books $ 25. 1040a tax form 2011 Stocks and bonds $ 26. 1040a tax form 2011 Investments in coins, stamps, paintings, or other collectibles $ 27. 1040a tax form 2011 Firearms, sports, photographic, and other hobby equipment $ 28. 1040a tax form 2011 Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 29. 1040a tax form 2011 Interest in a pension plan $ 30. 1040a tax form 2011 Interest in education accounts $ 31. 1040a tax form 2011 Cash value of life insurance $ 32. 1040a tax form 2011 Security deposits with landlords, utilities, and others $ 33. 1040a tax form 2011 Interests in partnerships $ 34. 1040a tax form 2011 Value of investment in a business $ 35. 1040a tax form 2011 Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. 1040a tax form 2011 Other assets not included above $ 37. 1040a tax form 2011 FMV of total assets immediately before the cancellation. 1040a tax form 2011 Add lines 16 through 36. 1040a tax form 2011 $ 42,000 Part III. 1040a tax form 2011 Insolvency 38. 1040a tax form 2011 Amount of Insolvency. 1040a tax form 2011 Subtract line 37 from line 15. 1040a tax form 2011 If zero or less, you are not insolvent. 1040a tax form 2011 $ 726,000    Frank and Kathy's Form 982 This image is too large to be displayed in the current screen. 1040a tax form 2011 Please click the link to view the image. 1040a tax form 2011 Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Prev  Up  Next   Home   More Online Publications