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Federal Tax Form 1040 Ez 2011

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Federal Tax Form 1040 Ez 2011

Federal tax form 1040 ez 2011 Publication 80 - Additional Material Prev  Up  Next   Home   More Online Publications
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The Federal Tax Form 1040 Ez 2011

Federal tax form 1040 ez 2011 2. Federal tax form 1040 ez 2011   Foreclosures and Repossessions Table of Contents Amount realized and ordinary income on a recourse debt. Federal tax form 1040 ez 2011 Amount realized on a nonrecourse debt. Federal tax form 1040 ez 2011 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. Federal tax form 1040 ez 2011 The foreclosure or repossession is treated as a sale from which you may realize gain or loss. Federal tax form 1040 ez 2011 This is true even if you voluntarily return the property to the lender. Federal tax form 1040 ez 2011 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. Federal tax form 1040 ez 2011 You must report this income on your return unless certain exceptions or exclusions apply. Federal tax form 1040 ez 2011 See chapter 1 for more details. Federal tax form 1040 ez 2011 Borrower's gain or loss. Federal tax form 1040 ez 2011    You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale. Federal tax form 1040 ez 2011 The gain is the difference between the amount realized and your adjusted basis in the transferred property (amount realized minus adjusted basis). Federal tax form 1040 ez 2011 The loss is the difference between your adjusted basis in the transferred property and the amount realized (adjusted basis minus amount realized). Federal tax form 1040 ez 2011 For more information on figuring gain or loss from the sale of property, see Gain or Loss From Sales and Exchanges in Publication 544. Federal tax form 1040 ez 2011 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. Federal tax form 1040 ez 2011 Amount realized and ordinary income on a recourse debt. Federal tax form 1040 ez 2011    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. Federal tax form 1040 ez 2011 The amount realized also includes any proceeds you received from the foreclosure sale. Federal tax form 1040 ez 2011 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. Federal tax form 1040 ez 2011 You must report this income on your return unless certain exceptions or exclusions apply. Federal tax form 1040 ez 2011 See chapter 1 for more details. Federal tax form 1040 ez 2011       Example 1. Federal tax form 1040 ez 2011 Tara bought a new car for $15,000. Federal tax form 1040 ez 2011 She made a $2,000 downpayment and borrowed the remaining $13,000 from the dealer's credit company. Federal tax form 1040 ez 2011 Tara is personally liable for the loan (recourse debt) and the car is pledged as security for the loan. Federal tax form 1040 ez 2011 On August 1, 2013, the credit company repossessed the car because Tara had stopped making loan payments. Federal tax form 1040 ez 2011 The balance due after taking into account the payments Tara made was $10,000. Federal tax form 1040 ez 2011 The FMV of the car when it was repossessed was $9,000. Federal tax form 1040 ez 2011 On November 15, 2013, the credit company forgave the remaining $1,000 balance on the loan due to insufficient assets. Federal tax form 1040 ez 2011 In this case, the amount Tara realizes is $9,000. Federal tax form 1040 ez 2011 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. Federal tax form 1040 ez 2011 Tara figures her gain or loss on the repossession by comparing the $9,000 amount realized with her $15,000 adjusted basis. Federal tax form 1040 ez 2011 She has a $6,000 nondeductible loss. Federal tax form 1040 ez 2011 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). Federal tax form 1040 ez 2011 Tara must report this $1,000 on her return unless one of the exceptions or exclusions described in chapter 1 applies. Federal tax form 1040 ez 2011 Example 2. Federal tax form 1040 ez 2011 Lili paid $200,000 for her home. Federal tax form 1040 ez 2011 She made a $15,000 downpayment and borrowed the remaining $185,000 from a bank. Federal tax form 1040 ez 2011 Lili is personally liable for the mortgage loan and the house secures the loan. Federal tax form 1040 ez 2011 In 2013, the bank foreclosed on the mortgage because Lili stopped making payments. Federal tax form 1040 ez 2011 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. Federal tax form 1040 ez 2011 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). Federal tax form 1040 ez 2011 She remained personally liable for the $8,000 balance. Federal tax form 1040 ez 2011 In this case, Lili has ordinary income from the cancellation of debt in the amount of $2,000. Federal tax form 1040 ez 2011 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). Federal tax form 1040 ez 2011 She is able to exclude the $2,000 of canceled debt from her income under the qualified principal residence indebtedness rules discussed earlier. Federal tax form 1040 ez 2011 Lili must also determine her gain or loss from the foreclosure. Federal tax form 1040 ez 2011 In this case, the amount that she realizes is $170,000. Federal tax form 1040 ez 2011 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. Federal tax form 1040 ez 2011 Lili figures her gain or loss on the foreclosure by comparing the $170,000 amount realized with her $175,000 adjusted basis. Federal tax form 1040 ez 2011 She has a $5,000 nondeductible loss. Federal tax form 1040 ez 2011 Table 1-1. Federal tax form 1040 ez 2011 Worksheet for Foreclosures and Repossessions Part 1. Federal tax form 1040 ez 2011 Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). Federal tax form 1040 ez 2011 Otherwise, go to Part 2. Federal tax form 1040 ez 2011 1. Federal tax form 1040 ez 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   2. Federal tax form 1040 ez 2011 Enter the fair market value of the transferred property   3. Federal tax form 1040 ez 2011 Ordinary income from the cancellation of debt upon foreclosure or repossession. Federal tax form 1040 ez 2011 * Subtract line 2 from line 1. Federal tax form 1040 ez 2011 If less than zero, enter zero. Federal tax form 1040 ez 2011 Next, go to Part 2   Part 2. Federal tax form 1040 ez 2011 Gain or loss from foreclosure or repossession. Federal tax form 1040 ez 2011   4. Federal tax form 1040 ez 2011 Enter the smaller of line 1 or line 2. Federal tax form 1040 ez 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   5. Federal tax form 1040 ez 2011 Enter any proceeds you received from the foreclosure sale   6. Federal tax form 1040 ez 2011 Add line 4 and line 5   7. Federal tax form 1040 ez 2011 Enter the adjusted basis of the transferred property   8. Federal tax form 1040 ez 2011 Gain or loss from foreclosure or repossession. Federal tax form 1040 ez 2011 Subtract line 7 from line 6   * The income may not be taxable. Federal tax form 1040 ez 2011 See chapter 1 for more details. Federal tax form 1040 ez 2011 Amount realized on a nonrecourse debt. Federal tax form 1040 ez 2011    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. Federal tax form 1040 ez 2011 This is true even if the FMV of the property is less than the outstanding debt immediately before the transfer. Federal tax form 1040 ez 2011 Example 1. Federal tax form 1040 ez 2011 Tara bought a new car for $15,000. Federal tax form 1040 ez 2011 She made a $2,000 downpayment and borrowed the remaining $13,000 from the dealer's credit company. Federal tax form 1040 ez 2011 Tara is not personally liable for the loan (nonrecourse), but pledged the new car as security for the loan. Federal tax form 1040 ez 2011 On August 1, 2013, the credit company repossessed the car because Tara had stopped making loan payments. Federal tax form 1040 ez 2011 The balance due after taking into account the payments Tara made was $10,000. Federal tax form 1040 ez 2011 The FMV of the car when it was repossessed was $9,000. Federal tax form 1040 ez 2011 The amount Tara realized on the repossession is $10,000. Federal tax form 1040 ez 2011 That is the outstanding amount of debt immediately before the repossession, even though the FMV of the car is less than $10,000. Federal tax form 1040 ez 2011 Tara figures her gain or loss on the repossession by comparing the $10,000 amount realized with her $15,000 adjusted basis. Federal tax form 1040 ez 2011 Tara has a $5,000 nondeductible loss. Federal tax form 1040 ez 2011 Example 2. Federal tax form 1040 ez 2011 Lili paid $200,000 for her home. Federal tax form 1040 ez 2011 She made a $15,000 downpayment and borrowed the remaining $185,000 from a bank. Federal tax form 1040 ez 2011 She is not personally liable for the loan, but grants the bank a mortgage. Federal tax form 1040 ez 2011 The bank foreclosed on the mortgage because Lili stopped making payments. Federal tax form 1040 ez 2011 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. Federal tax form 1040 ez 2011 The amount Lili realized on the foreclosure is $180,000, the outstanding debt immediately before the foreclosure. Federal tax form 1040 ez 2011 She figures her gain or loss by comparing the $180,000 amount realized with her $175,000 adjusted basis. Federal tax form 1040 ez 2011 Lili has a $5,000 realized gain. Federal tax form 1040 ez 2011 See Publication 523 to figure and report any taxable amount. Federal tax form 1040 ez 2011 Forms 1099-A and 1099-C. Federal tax form 1040 ez 2011    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. Federal tax form 1040 ez 2011 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. Federal tax form 1040 ez 2011 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. Federal tax form 1040 ez 2011 For foreclosures or repossessions occurring in 2013, these forms should be sent to you by January 31, 2014. 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