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1040nr Free Software

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1040nr Free Software

1040nr free software Index A Abatement of interest and penalties, Abatement of interest and penalties. 1040nr free software Accidents, Deductible losses. 1040nr free software , Nondeductible losses. 1040nr free software Adjusted basis, Adjusted Basis Adjustments to basis, Basis adjustment to corporation's property. 1040nr free software , Adjustments to Basis Amended returns, Amended return. 1040nr free software Appraisals, Appraisal. 1040nr free software , Costs of photographs and appraisals. 1040nr free software Assistance (see Tax help) B Bad debts, Nonbusiness bad debt. 1040nr free software Basis Adjusted, Adjusted Basis Adjustments to, Basis adjustment to corporation's property. 1040nr free software , Adjustments to Basis Replacement property, Basis of replacement property. 1040nr free software Business or income-producing property, Business or income-producing property. 1040nr free software Business purposes, property used partly for, Property used partly for business and partly for personal purposes. 1040nr free software C Cars Accidents, Deductible losses. 1040nr free software Fair market value of, Car value. 1040nr free software Cash gifts, Cash gifts. 1040nr free software Casualty losses, Table 3. 1040nr free software When To Deduct a Casualty or Theft Loss Deductible losses, Deductible losses. 1040nr free software Definition, Casualty Deposits, loss on, Casualty loss or ordinary loss. 1040nr free software Nondeductible losses, Nondeductible losses. 1040nr free software Progressive deterioration, Progressive deterioration. 1040nr free software Proof of, Casualty loss proof. 1040nr free software When to report, Losses. 1040nr free software Workbooks for listing property, Workbooks for casualties and thefts. 1040nr free software Clean up costs, Cost of cleaning up or making repairs. 1040nr free software Condemnation, Condemnations. 1040nr free software Corrosive drywall, Special Procedure for Damage From Corrosive Drywall Costs Appraisals, Costs of photographs and appraisals. 1040nr free software Clean up, Cost of cleaning up or making repairs. 1040nr free software Incidental expenses, Related expenses. 1040nr free software Landscaping, Landscaping. 1040nr free software Photographs taken after loss, Costs of photographs and appraisals. 1040nr free software Protection, Cost of protection. 1040nr free software Repair, Cost of cleaning up or making repairs. 1040nr free software Replacement, Replacement cost. 1040nr free software D Death of taxpayer Postponement of gain, Death of a taxpayer. 1040nr free software Deductible losses, Deductible losses. 1040nr free software Deduction limits, Deduction Limits $100 rule, $100 Rule 10% rule, 10% Rule 2% rule, 2% Rule Deposit losses, Mislaid or lost property. 1040nr free software , Table 3. 1040nr free software When To Deduct a Casualty or Theft Loss Reporting of (Table 1), Table 1. 1040nr free software Reporting Loss on Deposits When to report, Loss on deposits. 1040nr free software Disaster area losses, Lessee's loss. 1040nr free software Claiming on amended return, Claiming a disaster loss on an amended return. 1040nr free software Federal loan canceled, Federal loan canceled. 1040nr free software Federally declared disaster, Business or income-producing property located in a federally declared disaster area. 1040nr free software , Disaster Area Losses Figuring loss deduction, Figuring the loss deduction. 1040nr free software Form 1040X, How to report the loss on Form 1040X. 1040nr free software Home made unsafe, Home made unsafe by disaster. 1040nr free software How to deduct loss in preceding year, How to deduct your loss in the preceding year. 1040nr free software Inventory, Disaster loss to inventory. 1040nr free software Main home rules, Main home in disaster area. 1040nr free software , Gains. 1040nr free software Qualified disaster mitigation payments, Qualified disaster mitigation payments. 1040nr free software Qualified disaster relief payments, Qualified disaster relief payments. 1040nr free software Records to keep, Records. 1040nr free software Tax deadlines postponed, Covered disaster area. 1040nr free software When to deduct, When to deduct the loss. 1040nr free software Table 3, Table 3. 1040nr free software When To Deduct a Casualty or Theft Loss Disaster mitigation payments, Qualified disaster mitigation payments. 1040nr free software Disaster relief grants, Disaster relief. 1040nr free software Drywall, corrosive, Special Procedure for Damage From Corrosive Drywall Due dates Tax deadlines postponed, Postponed Tax Deadlines E Employer's emergency disaster fund, Employer's emergency disaster fund. 1040nr free software F Fair market value (FMV) Decline in value of property in or near casualty area, Decline in market value of property in or near casualty area. 1040nr free software Measuring decrease in, Decrease in Fair Market Value Items not to consider, Figuring Decrease in FMV — Items Not To Consider Items to consider, Figuring Decrease in FMV — Items To Consider Federal disaster relief grants, Federal disaster relief grants. 1040nr free software Federal Emergency Management Agency (FEMA), contacting, Contacting the Federal Emergency Management Agency (FEMA) Federally declared disasters, Business or income-producing property located in a federally declared disaster area. 1040nr free software , Disaster Area Losses Figuring gain, Property used partly for business and partly for personal purposes. 1040nr free software Figuring loss, Theft loss proof. 1040nr free software , Figuring the Deduction Adjusted basis, Adjusted Basis Disaster area losses, Figuring the loss deduction. 1040nr free software Insurance and other reimbursements, Insurance and Other Reimbursements Form 1040, Schedule A, Personal-use property. 1040nr free software Form 1040, Schedule D, Personal-use property. 1040nr free software Form 1040X Disaster area losses, How to report the loss on Form 1040X. 1040nr free software Form 4684 Reporting gains and losses on personal-use property, Personal-use property. 1040nr free software Free tax services, Free help with your tax return. 1040nr free software G Gains Figuring, Figuring a Gain Postponement of, Postponement of Gain, How To Postpone a Gain Reimbursements, Gain from reimbursement. 1040nr free software Reporting of, Contacting the Federal Emergency Management Agency (FEMA) When to report, Changing your mind. 1040nr free software H Help (see Tax help) I Incidental expenses, Related expenses. 1040nr free software Insurance, Insurance and Other Reimbursements Living expenses, payments for, Insurance payments for living expenses. 1040nr free software Interest abatement, Abatement of interest and penalties. 1040nr free software Inventory losses, Loss of inventory. 1040nr free software Disaster area losses, Disaster loss to inventory. 1040nr free software L Landscaping, Landscaping. 1040nr free software Leased property, Leased property. 1040nr free software When to report, Lessee's loss. 1040nr free software Losses Casualty (see Casualty losses) Deposits (see Deposit losses) Disaster areas (see Disaster area losses) Figuring amount (see Figuring loss) Proof of, Deducted loss recovered. 1040nr free software Records of, Theft loss proof. 1040nr free software Reporting of, Contacting the Federal Emergency Management Agency (FEMA) Theft (see Theft losses) When to report, Changing your mind. 1040nr free software (Table 3), Table 3. 1040nr free software When To Deduct a Casualty or Theft Loss M Married taxpayers Deduction limits, Married taxpayers. 1040nr free software , Married taxpayers. 1040nr free software Mislaid or lost property, Mislaid or lost property. 1040nr free software Missing children, photographs of, Reminders N Nonbusiness bad debts, Nonbusiness bad debt. 1040nr free software Nondeductible losses, Nondeductible losses. 1040nr free software P Payments for living expenses, Insurance payments for living expenses. 1040nr free software Penalty abatement, Abatement of interest and penalties. 1040nr free software Personal property Loss deduction, figuring of, Personal property. 1040nr free software Personal-use property Reporting gains and losses, Personal-use property. 1040nr free software Personal-use real property, Exception for personal-use real property. 1040nr free software Photographs Documentation of loss, Costs of photographs and appraisals. 1040nr free software Ponzi-type investment schemes, Losses from Ponzi-type investment schemes. 1040nr free software Postponed tax deadlines, Postponed Tax Deadlines Postponement of gain, Postponement of Gain, How To Postpone a Gain Amended return, Amended return. 1040nr free software Changing mind, Changing your mind. 1040nr free software Replacement property acquired after return filed, Replacement property acquired after return filed. 1040nr free software Replacement property acquired before return filed, Replacement property acquired before return filed. 1040nr free software Required statement, Required statement. 1040nr free software Substituting replacement property, Substituting replacement property. 1040nr free software Three-year limit, Three-year limit. 1040nr free software Proof of loss, Proof of Loss Protection costs, Cost of protection. 1040nr free software Publications (see Tax help) R Records of loss, Theft loss proof. 1040nr free software Recovered stolen property, Recovered stolen property. 1040nr free software Reimbursements Cash gifts, Cash gifts. 1040nr free software Disaster relief, Disaster relief. 1040nr free software Employer's emergency disaster fund, Employer's emergency disaster fund. 1040nr free software Failure to file a claim, Failure to file a claim for reimbursement. 1040nr free software Received after deducting loss, Reimbursement Received After Deducting Loss Types of, Types of Reimbursements Related expenses, Related expenses. 1040nr free software Related person, replacement property bought from, Buying replacement property from a related person. 1040nr free software Repair costs, Cost of cleaning up or making repairs. 1040nr free software Replacement cost, Replacement cost. 1040nr free software Replacement period, Replacement Period Extension of, Extension. 1040nr free software Replacement property, Replacement Property Advance payment, Advance payment. 1040nr free software Basis adjustment to corporation's property, Basis adjustment to corporation's property. 1040nr free software Basis of, Basis of replacement property. 1040nr free software Main home, Main home replaced. 1040nr free software In disaster area, Main home in disaster area. 1040nr free software Postponement of gain, Replacement property acquired before return filed. 1040nr free software Reporting gains and losses, Reporting a gain. 1040nr free software , How To Report Gains and Losses Basis, adjustments to, Adjustments to Basis Business and income-producing property, Business and income-producing property. 1040nr free software Deductions exceeding income, If Deductions Are More Than Income Deposits, How to report. 1040nr free software Table 1, Table 1. 1040nr free software Reporting Loss on Deposits Disaster area losses, How to report the loss on Form 1040X. 1040nr free software Personal-use property, Personal-use property. 1040nr free software Timing of, When To Report Gains and Losses S Sentimental value, Sentimental value. 1040nr free software State disaster relief grants for businesses, State disaster relief grants for businesses. 1040nr free software Stolen property (see Theft losses) T Tables and figures Reporting loss on deposits (Table 1), Table 1. 1040nr free software Reporting Loss on Deposits When to deduct losses (Table 3), Table 3. 1040nr free software When To Deduct a Casualty or Theft Loss Tax help, How To Get Tax Help Theft losses, Theft FMV of stolen property, FMV of stolen property. 1040nr free software Mislaid or lost property, Mislaid or lost property. 1040nr free software Proof of, Theft loss proof. 1040nr free software When to deduct (Table 3), Table 3. 1040nr free software When To Deduct a Casualty or Theft Loss When to report, Losses. 1040nr free software Workbooks for listing property, Workbooks for casualties and thefts. 1040nr free software Timber loss, Timber loss. 1040nr free software W Workbooks for property lost due to casualties and thefts, Workbooks for casualties and thefts. 1040nr free software Prev  Up     Home   More Online Publications
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The 1040nr Free Software

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