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State taxes free file Publication 596SP - Introductory Material Table of Contents Acontecimientos Futuros ¿Qué es el Crédito por Ingreso del Trabajo (EIC)? ¿Puedo Reclamar el Crédito por Ingreso del Trabajo (EIC)? ¿Necesito esta Publicación? ¿Hay que Tener un Hijo para Tener Derecho al Crédito por Ingreso del Trabajo (EIC)? ¿Cómo Calculo la Cantidad del Crédito por Ingreso del Trabajo (EIC)? ¿Cómo Puedo Encontrar Rápidamente Información Específica? ¿Hay Ayuda Disponible en Internet? Qué Hay de Nuevo para el año 2013 Recordatorios Acontecimientos Futuros Para la información más actualizada sobre los acontecimientos que afectan la Publicación 596(SP), tales como legislación promulgada después de su publicación, visite www. State taxes free file irs. State taxes free file gov/pub596sp, en inglés. State taxes free file ¿Qué es el Crédito por Ingreso del Trabajo (EIC)? El crédito por ingreso del trabajo (EIC, por sus siglas en inglés) es un crédito tributario para aquellas personas que trabajan y que reciben ingreso del trabajo inferior a $51,567. State taxes free file Un crédito tributario significa que va a tener más dinero disponible porque reduce la cantidad de impuesto a pagar. State taxes free file El crédito por ingreso del trabajo (EIC) también podría proporcionarle un reembolso. State taxes free file ¿Puedo Reclamar el Crédito por Ingreso del Trabajo (EIC)? Para tener derecho al crédito por ingreso del trabajo (EIC), tiene que cumplir determinados requisitos. State taxes free file Dichos requisitos se resumen en la Tabla 1. State taxes free file Tabla 1. State taxes free file Síntesis del Crédito por Ingreso del Trabajo Primero, tiene que cumplir todos los requisitos de esta columna. State taxes free file Segundo, tiene que cumplir todos los requisitos de una de estas columnas, la que le corresponda. State taxes free file Tercero, tiene que cumplir el requisito de esta columna. State taxes free file Capítulo 1. State taxes free file  Requisitos para Todos Capítulo 2. State taxes free file  Requisitos que Tiene que Cumplir si Tiene un Hijo Calificado Capítulo 3. State taxes free file  Requisitos que Tiene que Cumplir si no Tiene un Hijo Calificado Capítulo 4. State taxes free file  Calcular y Reclamar el Crédito por Ingreso del Trabajo (EIC) 1. State taxes free file Tiene que tener  ingresos brutos ajustados (AGI, por sus siglas en inglés) inferiores a:  • $46,227 ($51,567 para casados que presentan una declaración conjunta) si tiene tres o más hijos calificados,  • $43,038 ($48,378 para casados que presentan una declaración conjunta) si tiene dos hijos calificados,  • $37,870 ($43,210 para casados que presentan una declaración conjunta) si tiene un hijo calificado o  • $14,340 ($19,680 para casados que presentan una declaración conjunta) si no tiene un hijo calificado. State taxes free file 2. State taxes free file Tiene que tener un número de Seguro Social válido. State taxes free file   3. State taxes free file Su estado civil para efectos de la declaración no puede ser  “casado que presenta la declaración por separado”. State taxes free file   4. State taxes free file Tiene que ser ciudadano de los Estados Unidos o extranjero residente durante todo el año. State taxes free file   5. State taxes free file No puede presentar el Formulario 2555 ni el Formulario 2555-EZ (relacionado con el ingreso del trabajo en el extranjero). State taxes free file   6. State taxes free file Sus ingresos procedentes de inversiones tienen que ser de $3,300 o menos. State taxes free file    7. State taxes free file Tiene que haber recibido ingreso del trabajo. State taxes free file 8. State taxes free file Su hijo tiene que cumplir los requisitos de parentesco, edad, residencia y de declaración conjunta. State taxes free file   9. State taxes free file Soló una persona puede utilizar su hijo calificado para fines de reclamar el crédito por ingreso del trabajo (EIC). State taxes free file   10. State taxes free file Usted no puede ser el hijo calificado de otra persona. State taxes free file 11. State taxes free file Tiene que tener por lo menos 25 años de edad pero menos de 65 años de edad. State taxes free file   12. State taxes free file Usted no puede ser dependiente de otra persona. State taxes free file   13. State taxes free file Usted no puede ser el hijo calificado de otra persona. State taxes free file   14. State taxes free file Tiene que haber vivido en los Estados Unidos durante más de la mitad del año. State taxes free file 15. State taxes free file Tiene que tener ingresos del trabajo inferiores a:  • $46,227 ($51,567 para casados que presentan una declaración conjunta) si tiene tres o más hijos calificados,  • $43,038 ($48,378 para casados que presentan una declaración conjunta) si tiene dos hijos calificados,  • $37,870 ($43,210 para casados que presentan una declaración conjunta) si tiene un hijo calificado o  • $14,340 ($19,680 para casados que presentan una declaración conjunta) si no tiene un hijo calificado. State taxes free file ¿Necesito esta Publicación? Algunas personas que presenten el Formulario 1040 tienen que usar la Hoja de Trabajo 1 de esta publicación, en vez de consultar el Paso 2 de las instrucciones para el Formulario 1040, para determinar si pueden reclamar el crédito por ingreso del trabajo (EIC). State taxes free file Usted se encuentra en esta categoría si alguna de las siguientes situaciones le corresponde para el año 2013. State taxes free file Presenta el Anexo E (Formulario 1040). State taxes free file Declara ingresos provenientes del alquiler de bienes inmuebles/muebles que no son utilizados en un oficio o negocio. State taxes free file Declara ingresos en la línea 21 del Formulario 1040 que provienen del Formulario 8814 (relacionados con la elección de declarar los intereses y dividendos recibidos por un hijo). State taxes free file Declara una cantidad en la línea 13 del Formulario 1040 que incluye una cantidad del Formulario 4797. State taxes free file Si ninguna de las situaciones que aparecen anteriormente le corresponde, las instrucciones del formulario de impuestos contienen toda la información que necesita para saber si puede reclamar el crédito por ingreso del trabajo (EIC) y para calcular la cantidad del mismo. State taxes free file No necesita esta publicación, pero puede leerla para saber si puede reclamar el crédito por ingreso del trabajo (EIC) y para aprender más sobre este crédito. State taxes free file ¿Hay que Tener un Hijo para Tener Derecho al Crédito por Ingreso del Trabajo (EIC)? No. State taxes free file Puede reunir los requisitos del crédito por ingreso del trabajo (EIC) aunque no tenga un hijo calificado si usted tiene como mínimo 25 años de edad pero menos de 65 años y tiene ingresos del trabajo inferiores a $14,340 ($19,680 si es casado que presenta una declaración conjunta). State taxes free file Vea el capítulo 3 para información adicional. State taxes free file ¿Cómo Calculo la Cantidad del Crédito por Ingreso del Trabajo (EIC)? Si puede reclamar el crédito por ingreso del trabajo (EIC), tiene la opción de solicitar que el IRS le calcule la cantidad del crédito o puede calcularlo usted mismo. State taxes free file Para calcularlo usted mismo, puede llenar la hoja de trabajo que se encuentra en las instrucciones del formulario que presente. State taxes free file Para saber cómo solicitar que el IRS le calcule la cantidad del crédito, vea el capítulo 4. State taxes free file ¿Cómo Puedo Encontrar Rápidamente Información Específica? Puede utilizar el índice para buscar información específica. State taxes free file En la mayoría de los casos, el índice hace referencia a títulos, tablas u hojas de trabajo. State taxes free file ¿Hay Ayuda Disponible en Internet? Sí. State taxes free file Puede utilizar el Asistente EITC en el sitio web www. State taxes free file irs. State taxes free file gov/espanol para saber si tiene derecho al crédito. State taxes free file El Asistente EITC está disponible en español y en inglés. State taxes free file Qué Hay de Nuevo para el año 2013 La cantidad de ingresos del trabajo ha aumentado. State taxes free file La cantidad máxima de ingresos que usted puede ganar y aún obtener el crédito ha aumentado. State taxes free file Tal vez pueda reclamar el crédito si: Tiene tres o más hijos calificados y gana menos de $46,227 ($51,567 si es casado que presenta una declaración conjunta), Tiene dos hijos calificados y gana menos de $43,038 ($48,378 si es casado que presenta una declaración conjunta), Tiene un hijo calificado y gana menos de $37,870 ($43,210 si es casado que presenta una declaración conjunta) o No tiene un hijo calificado y gana menos de $14,340 ($19,680 si es casado que presenta una declaración conjunta). State taxes free file Además, tiene que tener ingresos brutos ajustados inferiores a la cantidad que le corresponda de la lista anterior. State taxes free file Para más información, vea los Requisitos 1 y 15. State taxes free file La cantidad de ingresos de inversiones ha aumentado. State taxes free file La cantidad máxima de ingresos de inversiones que usted puede ganar y aún obtener el crédito ha aumentado a $3,300. State taxes free file Vea el Requisito 6 —Tiene que tener ingresos de inversiones de $3,300 o menos . State taxes free file Recordatorios Aumento del crédito por ingreso del trabajo (EIC) en ciertas declaraciones conjuntas. State taxes free file  Una persona casada que presente una declaración conjunta podría recibir un crédito mayor que el que recibe otra persona que tenga los mismos ingresos pero con un estado civil diferente para efectos de la declaración. State taxes free file Por lo tanto, la Tabla del Crédito por Ingreso del Trabajo (EIC) tiene columnas distintas para las personas casadas que presenten una declaración conjunta que para los demás. State taxes free file Cuando busque su crédito por ingreso del trabajo en la Tabla del Crédito por Ingreso del Trabajo (EIC), asegúrese de usar la columna correcta para su estado civil para efectos de la declaración y el número de hijos que tenga. State taxes free file El crédito por ingreso del trabajo (EIC) no afecta ciertos pagos de bienestar social. State taxes free file  Todo reembolso que reciba por el crédito por ingreso del trabajo (EIC) no se considera ingreso al determinar si usted u otra persona tiene derecho a recibir beneficios de los programas de asistencia social que se indican a continuación, ni al determinar la cantidad que usted u otra persona puede recibir de algún programa federal, o algún programa estatal o local que recibe todo o parte de sus fondos de fuentes federales. State taxes free file Tales programas incluyen los siguientes: Asistencia Temporal para Familias Necesitadas (TANF, por sus siglas en inglés). State taxes free file Seguro Medicaid. State taxes free file Seguridad de Ingreso Suplementario (SSI, por sus siglas en inglés). State taxes free file Programas de Asistencia Suplementaria de Alimentación (SNAP, por sus siglas en inglés) (cupones para alimentos). State taxes free file Viviendas para personas de bajos ingresos. State taxes free file Además, cuando determine la elegibilidad, el reembolso no podrá ser contado como una fuente de ingresos, durante por lo menos 12 meses después que usted lo reciba. State taxes free file Hable con el coordinador de beneficios local para averiguar si su reembolso afectará sus beneficios. State taxes free file No se olvide del crédito estatal. State taxes free file  Si reúne los requisitos para reclamar el crédito por ingreso del trabajo (EIC) en la declaración de impuestos federales sobre los ingresos, podría tener también derecho a reclamar un crédito parecido en la declaración de impuestos estatales o locales sobre los ingresos. State taxes free file Para ver una lista de estados que ofrecen el crédito estatal por ingreso del trabajo, visite www. State taxes free file irs. State taxes free file gov/eitc. State taxes free file En caso de que el IRS cuestione el crédito por ingreso del trabajo (EIC). State taxes free file  El IRS puede pedirle que entregue documentos para comprobar que usted tiene derecho al crédito por ingreso del trabajo (EIC). State taxes free file Le informaremos cuáles documentos debe enviarnos. State taxes free file Éstos pueden incluir actas de nacimiento, expedientes académicos, expedientes médicos, etc. State taxes free file El proceso para determinar su derecho al crédito demorará su reembolso. State taxes free file Fotografías de niños desaparecidos. State taxes free file  El IRS se complace en colaborar con el Centro Nacional de Niños Desaparecidos y Explotados (National Center for Missing and Exploited Children). State taxes free file Esta publicación puede contener fotografías de niños desaparecidos seleccionadas por el Centro en páginas que de otra manera estarían en blanco. State taxes free file Usted puede ayudar a que estos niños regresen a su hogar si al mirar sus fotografías los identifica y llama gratis al 1-800-THE-LOST (1-800-843-5678). State taxes free file Comentarios y sugerencias. State taxes free file  Agradeceremos sus comentarios acerca de esta publicación, así como sus sugerencias para ediciones futuras. State taxes free file Nos puede escribir a la dirección siguiente:  Internal Revenue Service Tax Forms and Publications 1111 Constitution Ave. State taxes free file NW, IR-6526 Washington, DC 20224 Contestamos muchas cartas por teléfono. State taxes free file Por lo tanto, sería útil que incluyera en la correspondencia su número de teléfono, con el código de área, para llamar durante el día. State taxes free file Usted nos puede enviar comentarios desde la página web en www. State taxes free file irs. State taxes free file gov/formspubs, en inglés. State taxes free file Pulse sobre “More Information,” (Más información) y seleccionando “Give us feedback. State taxes free file ” (Proveer comentarios). State taxes free file Aunque no podemos contestar individualmente cada comentario, agradecemos sus comentarios y sugerencias y los tendremos en cuenta para ediciones futuras de nuestros productos tributarios. State taxes free file Para pedir formularios y publicaciones. State taxes free file  Visite www. State taxes free file irs. State taxes free file gov/formspubs para descargar formularios y publicaciones, llame al 1-800-829-3676 para pedir formularios y publicaciones o escriba a la dirección a continuación para recibir una respuesta dentro de los 10 días después de recibir su solicitud. State taxes free file  Internal Revenue Service 1201 N. State taxes free file Mitsubishi Motorway Bloomington, IL 61705-6613 Preguntas sobre los impuestos. State taxes free file  Si tiene una pregunta sobre los impuestos, verifique la información disponible en IRS. State taxes free file gov/espanol o llame al 1-800-829-1040. State taxes free file No podemos contestar preguntas sobre impuestos enviadas a ninguna de las dos direcciones anteriores. State taxes free file Prev  Up  Next   Home   More Online Publications
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State taxes free file 4. State taxes free file   Detailed Examples Table of Contents These examples use actual forms to help you prepare your income tax return. State taxes free file However, the information shown on the filled-in forms is not from any actual person or scenario. State taxes free file Example 1—Mortgage loan modification. State taxes free file    In 2007, Nancy Oak bought a main home for $435,000. State taxes free file Nancy took out a $420,000 mortgage loan to buy the home and made a down payment of $15,000. State taxes free file The loan was secured by the home. State taxes free file The mortgage loan was a recourse debt, meaning that Nancy was personally liable for the debt. State taxes free file 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. State taxes free file    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. State taxes free file The FMV of Nancy's home at the time of the refinancing was $500,000. State taxes free file 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. State taxes free file 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. State taxes free file   In 2013, Nancy was unable to make her mortgage loan payments. State taxes free file 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. State taxes free file Nancy was neither insolvent nor in bankruptcy at the time of the loan modification. State taxes free file   Nancy received a 2013 Form 1099-C from her bank in January 2014 showing canceled debt of $40,000 in box 2. State taxes free file Identifiable event code "F" appears in box 6. State taxes free file This box shows the reason the creditor has filed Form 1099-C. State taxes free file 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. State taxes free file Nancy determines that the only exception or exclusion that applies to her is the qualified principal residence indebtedness exclusion. State taxes free file   Next, Nancy determines the amount, if any, of the $40,000 of canceled debt that was qualified principal residence indebtedness. State taxes free file 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. State taxes free file 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. State taxes free file 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). State taxes free file   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. State taxes free file 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). State taxes free file Nancy must also include the $35,000 nonqualified debt portion in income on Form 1040, line 21. State taxes free file You can see Nancy's Form 1099-C and a portion of her Form 1040 below. State taxes free file Nancy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. State taxes free file Please click the link to view the image. State taxes free file Form 1099-C, Cancellation of Debt Nancy's 2013 Form 1040 This image is too large to be displayed in the current screen. State taxes free file Please click the link to view the image. State taxes free file Form 1040, U. State taxes free file S. State taxes free file Individual Income Tax Nancy's Form 982 This image is too large to be displayed in the current screen. State taxes free file Please click the link to view the image. State taxes free file Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)              Example 2—Mortgage loan foreclosure. State taxes free file    In 2005, John and Mary Elm bought a main home for $335,000. State taxes free file John and Mary took out a $320,000 mortgage loan to buy the home and made a down payment of $15,000. State taxes free file The loan was secured by the home and is a recourse debt, meaning John and Mary are personally liable for the debt. State taxes free file   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. State taxes free file 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. State taxes free file   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. State taxes free file Identifiable event code "D" appears in box 6. State taxes free file This box shows the reason the creditor has filed Form 1099-C. State taxes free file 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. State taxes free file In this example, John and Mary meet both the insolvency and qualified principal residence indebtedness exclusions. State taxes free file Their sample Form 1099-C is shown on this page. State taxes free file   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). State taxes free file 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. State taxes free file   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). State taxes free file Instead, John and Mary check box 1e of Form 982 to exclude the canceled debt under the qualified principal residence exclusion. State taxes free file 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. State taxes free file As a result, John and Mary enter the full $25,000 of canceled debt on line 2 of Form 982. State taxes free file 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. State taxes free file Thus, John and Mary leave line 10b of Form 982 blank. State taxes free file   John and Mary must also determine whether they have a gain or loss from the foreclosure. State taxes free file John and Mary complete Table 1-1 (shown below) and find that they have a $45,000 loss from the foreclosure. State taxes free file Because this loss relates to their home, it is a nondeductible loss. State taxes free file   John and Mary's Form 1099-C, Insolvency Worksheet, and Form 982 follow. State taxes free file John and Mary's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. State taxes free file Please click the link to view the image. State taxes free file Form 1099-C, Cancellation of Debt Table 1-1. State taxes free file Worksheet for Foreclosures and Repossessions (for John and Mary Elm) Part 1. State taxes free file Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). State taxes free file Otherwise, go to Part 2. State taxes free file 1. State taxes free file 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. State taxes free file 00 2. State taxes free file Enter the fair market value of the transferred property $290,000. State taxes free file 00 3. State taxes free file Ordinary income from the cancellation of debt upon foreclosure or repossession. State taxes free file * Subtract line 2 from line 1. State taxes free file If less than zero, enter zero. State taxes free file Next, go to Part 2 $ 25,000. State taxes free file 00 Part 2. State taxes free file Gain or loss from foreclosure or repossession. State taxes free file   4. State taxes free file Enter the smaller of line 1 or line 2. State taxes free file 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. State taxes free file 00 5. State taxes free file Enter any proceeds you received from the foreclosure sale   6. State taxes free file Add line 4 and line 5 $290,000. State taxes free file 00 7. State taxes free file Enter the adjusted basis of the transferred property $335,000. State taxes free file 00 8. State taxes free file Gain or loss from foreclosure or repossession. State taxes free file Subtract line 7 from line 6 ($ 45,000. State taxes free file 00) * The income may not be taxable. State taxes free file See chapter 1 for more details. State taxes free file Insolvency Worksheet—John and Mary Elm Date debt was canceled (mm/dd/yy) 03/01/13 Part I. State taxes free file 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. State taxes free file Credit card debt $ 5,500 2. State taxes free file 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. State taxes free file Car and other vehicle loans $ 4. State taxes free file Medical bills owed $ 5. State taxes free file Student loans $ 6. State taxes free file Accrued or past-due mortgage interest $ 7. State taxes free file Accrued or past-due real estate taxes $ 8. State taxes free file Accrued or past-due utilities (water, gas, electric) $ 9. State taxes free file Accrued or past-due child care costs $ 10. State taxes free file Federal or state income taxes remaining due (for prior tax years) $ 11. State taxes free file Judgments $ 12. State taxes free file Business debts (including those owed as a sole proprietor or partner) $ 13. State taxes free file Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. State taxes free file Other liabilities (debts) not included above $ 15. State taxes free file Total liabilities immediately before the cancellation. State taxes free file Add lines 1 through 14. State taxes free file $ 320,500 Part II. State taxes free file 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. State taxes free file Cash and bank account balances $ 6,000 17. State taxes free file 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. State taxes free file Cars and other vehicles $ 19. State taxes free file Computers $ 20. State taxes free file Household goods and furnishings (for example, appliances, electronics, furniture, etc. State taxes free file ) $ 21. State taxes free file Tools $ 22. State taxes free file Jewelry $ 23. State taxes free file Clothing $ 24. State taxes free file Books $ 25. State taxes free file Stocks and bonds $ 26. State taxes free file Investments in coins, stamps, paintings, or other collectibles $ 27. State taxes free file Firearms, sports, photographic, and other hobby equipment $ 28. State taxes free file Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 13,000 29. State taxes free file Interest in a pension plan $ 30. State taxes free file Interest in education accounts $ 31. State taxes free file Cash value of life insurance $ 32. State taxes free file Security deposits with landlords, utilities, and others $ 33. State taxes free file Interests in partnerships $ 34. State taxes free file Value of investment in a business $ 35. State taxes free file Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. State taxes free file Other assets not included above $ 37. State taxes free file FMV of total assets immediately before the cancellation. State taxes free file Add lines 16 through 36. State taxes free file $ 309,000 Part III. State taxes free file Insolvency 38. State taxes free file Amount of Insolvency. State taxes free file Subtract line 37 from line 15. State taxes free file If zero or less, you are not insolvent. State taxes free file $ 11,500 John and Mary's Form 982 This image is too large to be displayed in the current screen. State taxes free file Please click the link to view the image. State taxes free file 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. State taxes free file    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. State taxes free file 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. State taxes free file Kathy and Frank are personally liable for the mortgage loan, which is secured by the home. State taxes free file   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. State taxes free file The lender foreclosed on the property and, on December 5, 2013, sold the property to another buyer for $1,750,000. State taxes free file On December 26, 2013, the lender canceled the remaining debt. State taxes free file Kathy and Frank have no tax attributes other than basis of personal-use property. State taxes free file   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). State taxes free file Identifiable event code "D" appears in box 6. State taxes free file This box shows the reason the creditor has filed Form 1099-C. State taxes free file 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. State taxes free file Kathy and Frank are filing a joint return for 2013. State taxes free file   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. State taxes free file 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). State taxes free file 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. State taxes free file Because this loss relates to their home, it is a nondeductible loss. State taxes free file   Because the lender later canceled the remaining amount of the debt, Kathy and Frank must also determine whether that canceled debt is taxable. State taxes free file 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. State taxes free file Kathy and Frank also had the $750,000 remaining balance on the mortgage loan at that time. State taxes free file The household furnishings originally cost $30,000. State taxes free file The car had been fully paid off (so there was no related outstanding debt) and was originally purchased for $16,000. State taxes free file Kathy and Frank had no adjustments to the cost basis of the car. State taxes free file Kathy and Frank had no other assets or liabilities at the time of the cancellation. State taxes free file 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). State taxes free file   At the beginning of 2014, Kathy and Frank had $9,000 in their savings account and $15,000 in credit card debt. State taxes free file 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). State taxes free file Kathy and Frank had no other assets or liabilities at that time. State taxes free file Kathy and Frank no longer own the home because the lender foreclosed on it in 2013. State taxes free file   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. State taxes free file The maximum amount that Kathy and Frank can treat as qualified principal residence indebtedness is $2,000,000. State taxes free file 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. State taxes free file Because only a part of the loan is qualified principal residence indebtedness, Kathy and Frank must apply the ordering rule to the canceled debt. State taxes free file 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). State taxes free file 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. State taxes free file   Kathy and Frank do not elect to have the insolvency exclusion apply instead of the qualified principal residence exclusion. State taxes free file Nonetheless, they can still apply the insolvency exclusion to the $500,000 nonqualified debt because it is not qualified principal residence indebtedness. State taxes free file 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. State taxes free file 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). State taxes free file   Next, Kathy and Frank reduce their tax attributes using Part II of Form 982. State taxes free file 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. State taxes free file Thus, Kathy and Frank leave line 10b of Form 982 blank. State taxes free file However, Kathy and Frank are also excluding nonqualified debt under the insolvency exclusion. State taxes free file 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. State taxes free file 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). State taxes free file 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. State taxes free file Kathy and Frank reduce the basis in the car by $14,956. State taxes free file 52 ($43,000 x $16,000/$46,000). State taxes free file And they reduce the basis in the household furnishings by $28,043. State taxes free file 48 ($43,000 x $30,000/$46,000). State taxes free file   Following are Kathy and Frank's sample forms and worksheets. State taxes free file Frank and Kathy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. State taxes free file Please click the link to view the image. State taxes free file Form 1099-C, Cancellation of Debt Table 1-1. State taxes free file Worksheet for Foreclosures and Repossessions (for Frank and Kathy Willow) Part 1. State taxes free file Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). State taxes free file Otherwise, go to Part 2. State taxes free file 1. State taxes free file 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. State taxes free file 00 2. State taxes free file Enter the fair market value of the transferred property $1,750,000. State taxes free file 00 3. State taxes free file Ordinary income from the cancellation of debt upon foreclosure or repossession. State taxes free file * Subtract line 2 from line 1. State taxes free file If less than zero, enter zero. State taxes free file Next, go to Part 2 $0. State taxes free file 00 Part 2. State taxes free file Gain or loss from foreclosure or repossession. State taxes free file   4. State taxes free file Enter the smaller of line 1 or line 2. State taxes free file 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. State taxes free file $1,750,000. State taxes free file 00 5. State taxes free file Enter any proceeds you received from the foreclosure sale   6. State taxes free file Add line 4 and line 5 $1,750,000. State taxes free file 00 7. State taxes free file Enter the adjusted basis of the transferred property $3,000,000. State taxes free file 00 8. State taxes free file Gain or loss from foreclosure or repossession. State taxes free file Subtract line 7 from line 6 ($1,250,000. State taxes free file 00) * The income may not be taxable. State taxes free file See chapter 1 for more details. State taxes free file    Insolvency Worksheet—Frank and Kathy Willow Date debt was canceled (mm/dd/yy) 12/26/13 Part I. State taxes free file 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. State taxes free file Credit card debt $ 18,000 2. State taxes free file 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. State taxes free file Car and other vehicle loans $ 4. State taxes free file Medical bills owed $ 5. State taxes free file Student loans $ 6. State taxes free file Accrued or past-due mortgage interest $ 7. State taxes free file Accrued or past-due real estate taxes $ 8. State taxes free file Accrued or past-due utilities (water, gas, electric) $ 9. State taxes free file Accrued or past-due child care costs $ 10. State taxes free file Federal or state income taxes remaining due (for prior tax years) $ 11. State taxes free file Judgments $ 12. State taxes free file Business debts (including those owed as a sole proprietor or partner) $ 13. State taxes free file Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. State taxes free file Other liabilities (debts) not included above $ 15. State taxes free file Total liabilities immediately before the cancellation. State taxes free file Add lines 1 through 14. State taxes free file $ 768,000 Part II. State taxes free file 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. State taxes free file Cash and bank account balances $ 15,000 17. State taxes free file 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. State taxes free file Cars and other vehicles $ 10,000 19. State taxes free file Computers $ 20. State taxes free file Household goods and furnishings (for example, appliances, electronics, furniture, etc. State taxes free file ) $ 17,000 21. State taxes free file Tools $ 22. State taxes free file Jewelry $ 23. State taxes free file Clothing $ 24. State taxes free file Books $ 25. State taxes free file Stocks and bonds $ 26. State taxes free file Investments in coins, stamps, paintings, or other collectibles $ 27. State taxes free file Firearms, sports, photographic, and other hobby equipment $ 28. State taxes free file Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 29. State taxes free file Interest in a pension plan $ 30. State taxes free file Interest in education accounts $ 31. State taxes free file Cash value of life insurance $ 32. State taxes free file Security deposits with landlords, utilities, and others $ 33. State taxes free file Interests in partnerships $ 34. State taxes free file Value of investment in a business $ 35. State taxes free file Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. State taxes free file Other assets not included above $ 37. State taxes free file FMV of total assets immediately before the cancellation. State taxes free file Add lines 16 through 36. State taxes free file $ 42,000 Part III. State taxes free file Insolvency 38. State taxes free file Amount of Insolvency. State taxes free file Subtract line 37 from line 15. State taxes free file If zero or less, you are not insolvent. State taxes free file $ 726,000    Frank and Kathy's Form 982 This image is too large to be displayed in the current screen. State taxes free file Please click the link to view the image. State taxes free file Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Prev  Up  Next   Home   More Online Publications