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Filing Taxes For 2013

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Filing Taxes For 2013

Filing taxes for 2013 Publication 4681 - Introductory Material Table of Contents Reminder IntroductionOrdering forms and publications. Filing taxes for 2013 Tax questions. Filing taxes for 2013 Useful Items - You may want to see: Common Situations Covered In This Publication Reminder Future Developments. Filing taxes for 2013  Information about any future developments affecting Publication 4681 (such as legislation enacted after we release it) will be posted at www. Filing taxes for 2013 irs. Filing taxes for 2013 gov/pub4681. Filing taxes for 2013 Photographs of missing children. Filing taxes for 2013   The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Filing taxes for 2013 Photographs of missing children selected by the Center may appear in this publication on pages that otherwise would be blank. Filing taxes for 2013 You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Filing taxes for 2013 Introduction This publication explains the federal tax treatment of canceled debts, foreclosures, repossessions, and abandonments. Filing taxes for 2013 Generally, if you owe a debt to someone else and they cancel or forgive that debt for less than its full amount, you are treated for income tax purposes as having income and may have to pay tax on this income. Filing taxes for 2013 Note. Filing taxes for 2013 This publication generally refers to debt that is canceled, forgiven, or discharged for less than the full amount of the debt as “canceled debt. Filing taxes for 2013 ” Sometimes a debt, or part of a debt, that you do not have to pay is not considered canceled debt. Filing taxes for 2013 These exceptions are discussed later under Exceptions . Filing taxes for 2013 Sometimes a canceled debt may be excluded from your income. Filing taxes for 2013 But if you do exclude canceled debt from income, you may be required to reduce your “tax attributes. Filing taxes for 2013 ” These exclusions and the reduction of tax attributes associated with them are discussed later under Exclusions . Filing taxes for 2013 Foreclosure and repossession are remedies that your lender may exercise if you fail to make payments on your loan and you have previously granted that lender a mortgage or other security interest in some of your property. Filing taxes for 2013 These remedies allow the lender to seize or sell the property securing the loan. Filing taxes for 2013 When your property is foreclosed upon or repossessed and sold, you are treated as having sold the property and you may recognize taxable gain. Filing taxes for 2013 Whether you also recognize income from canceled debt depends in part on whether you are personally liable for the debt and in part on whether the outstanding loan balance is more than the fair market value (FMV) of the property. Filing taxes for 2013 Figuring your gain or loss and income from canceled debt arising from a foreclosure or repossession is discussed later under Foreclosures and Repossessions . Filing taxes for 2013 Generally, you abandon property when you voluntarily and permanently give up possession and use of property you own with the intention of ending your ownership but without passing it on to anyone else. Filing taxes for 2013 Figuring your gain or loss and income from canceled debt arising from an abandonment is discussed later under Abandonments . Filing taxes for 2013 This publication also includes detailed examples with filled-in forms. Filing taxes for 2013 Comments and suggestions. Filing taxes for 2013    We welcome your comments about this publication and your suggestions for future editions. Filing taxes for 2013   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Filing taxes for 2013 NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Filing taxes for 2013 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Filing taxes for 2013   You can send your comments from www. Filing taxes for 2013 irs. Filing taxes for 2013 gov/formspubs. Filing taxes for 2013 Click on “More Information” and then on “Comment on Tax Forms and Publications”. Filing taxes for 2013   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Filing taxes for 2013 Ordering forms and publications. Filing taxes for 2013    Visit www. Filing taxes for 2013 irs. Filing taxes for 2013 gov/formspubs to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Filing taxes for 2013 Internal Revenue Service 1201 N. Filing taxes for 2013 Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Filing taxes for 2013    If you have a tax question, check the information available on IRS. Filing taxes for 2013 gov or call 1-800-829-1040. Filing taxes for 2013 We cannot answer tax questions sent to either of the above addresses. Filing taxes for 2013 Useful Items - You may want to see: Publication 225 Farmer's Tax Guide 334 Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) 523 Selling Your Home 525 Taxable and Nontaxable Income 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 542 Corporations 544 Sales and Other Dispositions of Assets 551 Basis of Assets 908 Bankruptcy Tax Guide Form (and Instructions) 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) 1099-C Cancellation of Debt 1099-DIV Dividends and Distributions 3800 General Business Credit Common Situations Covered In This Publication The sections of this publication that apply to you depend on the type of debt canceled, the tax attributes you have, and whether or not you continue to own the property that was subject to the debt. Filing taxes for 2013 Some examples of common circumstances are provided in the following paragraphs to help guide you through this publication. Filing taxes for 2013 These examples do not cover every situation but are intended to provide general guidance for the most common situations. Filing taxes for 2013 Nonbusiness credit card debt cancellation. Filing taxes for 2013    If you had a nonbusiness credit card debt canceled, you may be able to exclude the canceled debt from income if the cancellation occurred in a title 11 bankruptcy case or you were insolvent immediately before the cancellation. Filing taxes for 2013 You should read Bankruptcy or Insolvency under Exclusions in chapter 1 to see if you can exclude the canceled debt from income under one of those provisions. Filing taxes for 2013 If you can exclude part or all of the canceled debt from income, you should also read Bankruptcy and Insolvency under Reduction of Tax Attributes in chapter 1. Filing taxes for 2013 Personal vehicle repossession. Filing taxes for 2013    If you had a personal vehicle repossessed and disposed of by the lender during the year, you will need to determine your gain or nondeductible loss on the disposition. Filing taxes for 2013 This is explained in chapter 2 . Filing taxes for 2013 If the lender also canceled all or part of the remaining amount of the loan, you may be able to exclude the canceled debt from income if the cancellation occurred in a title 11 bankruptcy case or you were insolvent immediately before the cancellation. Filing taxes for 2013 You should read Bankruptcy or Insolvency under Exclusions in chapter 1 to see if you can exclude the canceled debt from income under one of those provisions. Filing taxes for 2013 If you can exclude part or all of the canceled debt from income, you should also read Bankruptcy and Insolvency under Reduction of Tax Attributes in chapter 1. Filing taxes for 2013 Main home foreclosure or abandonment. Filing taxes for 2013    If a lender foreclosed on your main home during the year, you will need to determine your gain or loss on the foreclosure. Filing taxes for 2013 Foreclosures are explained in chapter 2 and abandonments are explained in chapter 3. Filing taxes for 2013 If the lender also canceled all or part of the remaining amount on the mortgage loan and you were personally liable for the debt, you should also read Qualified Principal Residence Indebtedness under Exclusions in chapter 1 to see if you can exclude part or all of the canceled debt from income. Filing taxes for 2013 Detailed Example 2 and Example 3 in chapter 4 use filled-in forms to help explain these provisions. Filing taxes for 2013 Main home loan modification (workout agreement). Filing taxes for 2013    If a lender agrees to a mortgage loan modification (a “workout”) that includes a reduction in the principal balance of the loan, you should read Qualified Principal Residence Indebtedness under Exclusions in chapter 1 to see if you can exclude part or all of the canceled debt from income. Filing taxes for 2013 If you can exclude part or all of the canceled debt from income, you should also read Qualified Principal Residence Indebtedness under Reduction of Tax Attributes in chapter 1. Filing taxes for 2013 Detailed Example 1 in chapter 4 uses filled-in forms to help explain the tax implications of a mortgage workout scenario. Filing taxes for 2013 Prev  Up  Next   Home   More Online Publications
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Page Last Reviewed or Updated: 04-Mar-2014

The Filing Taxes For 2013

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