Tax CPE Course - Debt Cancellation and Foreclosure

Delivery Method: Self-Study

This course looks at the implications of debt relief as it applies to a number of situations, including foreclosure, repossession, voluntary reconveyance, short sale, abandonment of secured property and cancellation of debt. It explains how to report the various transactions for tax purposes and how to exclude debt relief income using the various Sec 108 exclusions, including insolvency and home mortgage debt relief exclusion. This course also includes Rules for Attribute and Basis Reduction and line-by-line instructions for completing Form 982.

Final Exam Grading Policy: Course material must be completed within 12 months of purchase. A score of 70% or better is needed for passing. The completion certificate will be automatically generated by the system.

This text is divided as follows:

Overview 3
Related IRS Publications and Forms 3
Step by Step Approach 3
Step #1 - Determine if There is COD Income and if so the Amount 3
Personal Liability 3
Recourse or Non-recourse 3
List of Non-recourse States 4
Date of Debt Discharge 4
Identifiable Events Triggering 1099-C 4
1099-C 5
1099-A 5
Pass-through Entities 6
Step #2 - Determine if Taxpayer Qualifies for One or More Exclusions 6
Choosing an Exclusion Method 6
Insolvency Exception 6
Determining Insolvency 6
Reduction of tax Attributes 6
Sequence of Attribute Reduction 7
When Attributes are Reduced 7
Election to First Reduce the Basis of Depreciable Assets 7
Basis Reduction Limitations 8
Special Election � Dealers in Real Property 8
Calculating Insolvency 8
Review Questions � Part I 9
Principal Residence Acquisition Debt Forgiveness Exclusion 11
Overview 11
Application 11
Limitations 11
Qualified Principal Residence Indebtedness 11
Acquisition Indebtedness 11
Ordering Rules 12
Basis Adjustment 12
Electing Out of Mortgage Relief Exclusion 12
Things to Consider 12
Discharge of Qualified Real Property Business Indebtedness 12
Limitations 12
Mortgage over FMV Limit 12
Mortgage over Basis Limit 12
Definition of Qualified Real Property Business Indebtedness 13
Definition of Acquisition Indebtedness 13
When Basis Adjustment Takes Place 13
Review Questions � Part II 14
Discharge of Qualified Farm Business Indebtedness 16
Limitations 16
Definitions 16
Qualified Property 16
Qualified Person 16
Order of Basis Reduction 16
Student Loan Cancellation Forgiveness 16
Forgiveness of Tax-deductible Items 16
Gift Exception 17
Reduction of Purchase Price 17
Step #3 � Determine if There is Also an Asset Sale That Must Be Dealt With 17
Type of Disposition 17
Short Sale 17
Foreclosure or Abandonment 17
Repossession 17
Computing the �Sale Price� 18
Home Sale 18
Home Sale � Business Use 18
Examples
Car Repossession 18
Home Foreclosure 19
Rental Foreclosure (with gain) 19
Rental Foreclosure (with loss) 20
Rental Loan Modification 20
Step #4 � Complete Form 982 and Reduce Attributes if Required 20
Supplemental Attachment Identify Property Subject to Basis Reduction 20
Flow Charts for Completing Form 982 and Reducing Attributes 21
Insolvency Exclusion 22
Principal Residence Acquisition Debt Forgiveness Exclusion 23
Qualified Real Property Business Indebtedness Exclusion 23
Qualified Farm Indebtedness Exclusion 24
Form 982 25
Review Questions � Part III 26

After taking this course, the student will understand the implications of debt relief as it applies to a number of situations, including foreclosure, repossession, voluntary reconveyance, short sale, abandonment of secured property and cancellation of debt. It explains how to report the various transactions for tax purposes and how to exclude debt relief income using the various Sec 108 exclusions, including insolvency and home mortgage debt relief exclusion. This course also includes Rules for Attribute and Basis Reduction and line-by-line instructions for completing Form 982.

CTEC
NASBA
IRS - Enrolled Agents
Oregon TP

CPE20910 - Debt Cancellation and Foreclosure Issues Online CPE