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2012 Federal Tax Amendment

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2012 Federal Tax Amendment

2012 federal tax amendment 4. 2012 federal tax amendment   Reporting Gains and Losses Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Information Returns Schedule D and Form 8949Long and Short Term Net Gain or Loss Treatment of Capital Losses Capital Gains Tax Rates Form 4797Mark-to-market election. 2012 federal tax amendment Introduction This chapter explains how to report capital gains and losses and ordinary gains and losses from sales, exchanges, and other dispositions of property. 2012 federal tax amendment Although this discussion refers to Schedule D (Form 1040) and Form 8949, many of the rules discussed here also apply to taxpayers other than individuals. 2012 federal tax amendment However, the rules for property held for personal use usually will not apply to taxpayers other than individuals. 2012 federal tax amendment Topics - This chapter discusses: Information returns Schedule D (Form 1040) Form 4797 Form 8949 Useful Items - You may want to see: Publication 550 Investment Income and Expenses 537 Installment Sales Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 1099-B Proceeds From Broker and Barter Exchange Transactions 1099-S Proceeds From Real Estate Transactions 4684 Casualties and Thefts 4797 Sales of Business Property 6252 Installment Sale Income 6781 Gains and Losses from Section 1256 Contracts and Straddles 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets See chapter 5 for information about getting publications and forms. 2012 federal tax amendment Information Returns If you sell or exchange certain assets, you should receive an information return showing the proceeds of the sale. 2012 federal tax amendment This information is also provided to the IRS. 2012 federal tax amendment Form 1099-B. 2012 federal tax amendment   If you sold property, such as stocks, bonds, or certain commodities, through a broker, you should receive Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or a substitute statement from the broker. 2012 federal tax amendment Use the Form 1099-B or a substitute statement to complete Form 8949 and/or Schedule D. 2012 federal tax amendment Whether or not you receive 1099-B, you must report all taxable sales of stock, bonds, commodities, etc. 2012 federal tax amendment on Form 8949 and/or Schedule D, as applicable. 2012 federal tax amendment For more information on figuring gains and losses from these transactions, see chapter 4 in Publication 550. 2012 federal tax amendment For information on reporting the gains and losses, see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). 2012 federal tax amendment Form 1099-S. 2012 federal tax amendment   An information return must be provided on certain real estate transactions. 2012 federal tax amendment Generally, the person responsible for closing the transaction (the “real estate reporting person”) must report on Form 1099-S sales or exchanges of the following types of property. 2012 federal tax amendment Land (improved or unimproved), including air space. 2012 federal tax amendment An inherently permanent structure, including any residential, commercial, or industrial building. 2012 federal tax amendment A condominium unit and its related fixtures and common elements (including land). 2012 federal tax amendment Stock in a cooperative housing corporation. 2012 federal tax amendment If you sold or exchanged any of the above types of property, the “real estate reporting person” must give you a copy of Form 1099-S or a statement containing the same information as the Form 1099-S. 2012 federal tax amendment The “real estate reporting person” could include the buyer's attorney, your attorney, the title or escrow company, a mortgage lender, your broker, the buyer's broker, or the person acquiring the biggest interest in the property. 2012 federal tax amendment   For more information see chapter 4 in Publication 550. 2012 federal tax amendment Also, see the Instructions for Form 8949. 2012 federal tax amendment Schedule D and Form 8949 Form 8949. 2012 federal tax amendment   Individuals, corporations, and partnerships, use Form 8949 to report the following. 2012 federal tax amendment    Sales or exchanges of capital assets, including stocks, bonds, etc. 2012 federal tax amendment , and real estate (if not reported on another form or schedule such as Form 4684, 4797, 6252, 6781, or 8824). 2012 federal tax amendment Include these transactions even if you did not receive a Form 1099-B or 1099-S. 2012 federal tax amendment Gains from involuntary conversions (other than from casualty or theft) of capital assets not held for business or profit. 2012 federal tax amendment Nonbusiness bad debts. 2012 federal tax amendment   Individuals, If you are filing a joint return, complete as many copies of Form 8949 as you need to report all of your and your spouse's transactions. 2012 federal tax amendment You and your spouse may list your transactions on separate forms or you may combine them. 2012 federal tax amendment However, you must include on your Schedule D the totals from all Forms 8949 for both you and your spouse. 2012 federal tax amendment    Corporations and electing large partnerships also use Form 8949 to report their share of gain or loss from a partnership, S Corporation, estate or trust. 2012 federal tax amendment   Business entities meeting certain criteria, may have an exception to some of the normal requirements for completing Form 8949. 2012 federal tax amendment See the Instructions for Form 8949. 2012 federal tax amendment Schedule D. 2012 federal tax amendment    Use Schedule D (Form 1040) to figure the overall gain or loss from transactions reported on Form 8949, and to report certain transactions you do not have to report on Form 8949. 2012 federal tax amendment Before completing Schedule D, you may have to complete other forms as shown below. 2012 federal tax amendment    Complete all applicable lines of Form 8949 before completing lines 1b, 2, 3, 8b, 9, or 10 of your applicable Schedule D. 2012 federal tax amendment Enter on Schedule D the combined totals from all your Forms 8949. 2012 federal tax amendment For a sale, exchange, or involuntary conversion of business property, complete Form 4797 (discussed later). 2012 federal tax amendment For a like-kind exchange, complete Form 8824. 2012 federal tax amendment See Reporting the exchange under Like-Kind Exchanges in chapter 1. 2012 federal tax amendment For an installment sale, complete Form 6252. 2012 federal tax amendment See Publication 537. 2012 federal tax amendment For an involuntary conversion due to casualty or theft, complete Form 4684. 2012 federal tax amendment See Publication 547, Casualties, Disasters, and Thefts. 2012 federal tax amendment For a disposition of an interest in, or property used in, an activity to which the at-risk rules apply, complete Form 6198, At-Risk Limitations. 2012 federal tax amendment See Publication 925, Passive Activity and At-Risk Rules. 2012 federal tax amendment For a disposition of an interest in, or property used in, a passive activity, complete Form 8582, Passive Activity Loss Limitations. 2012 federal tax amendment See Publication 925. 2012 federal tax amendment For gains and losses from section 1256 contracts and straddles, complete Form 6781. 2012 federal tax amendment See Publication 550. 2012 federal tax amendment Personal-use property. 2012 federal tax amendment   Report gain on the sale or exchange of property held for personal use (such as your home) on Form 8949 and Schedule D (Form 1040), as applicable. 2012 federal tax amendment Loss from the sale or exchange of property held for personal use is not deductible. 2012 federal tax amendment But if you had a loss from the sale or exchange of real estate held for personal use for which you received a Form 1099-S, report the transaction on Form 8949 and Schedule D, even though the loss is not deductible. 2012 federal tax amendment See the Instructions for Schedule D (Form 1040) and the Instructions for Form 8949 for information on how to report the transaction. 2012 federal tax amendment Long and Short Term Where you report a capital gain or loss depends on how long you own the asset before you sell or exchange it. 2012 federal tax amendment The time you own an asset before disposing of it is the holding period. 2012 federal tax amendment If you received a Form 1099-B, (or substitute statement) box 1c may help you determine whether the gain or loss is short-term or long-term. 2012 federal tax amendment If you hold a capital asset 1 year or less, the gain or loss from its disposition is short term. 2012 federal tax amendment Report it in Part I of Form 8949 and/or Schedule D, as applicable. 2012 federal tax amendment If you hold a capital asset longer than 1 year, the gain or loss from its disposition is long term. 2012 federal tax amendment Report it in Part II of Form 8949 and/or Schedule D, as applicable. 2012 federal tax amendment   Table 4-1. 2012 federal tax amendment Do I Have a Short-Term or Long-Term Gain or Loss? IF you hold the property. 2012 federal tax amendment . 2012 federal tax amendment . 2012 federal tax amendment  THEN you have a. 2012 federal tax amendment . 2012 federal tax amendment . 2012 federal tax amendment 1 year or less, Short-term capital gain or  loss. 2012 federal tax amendment More than 1 year, Long-term capital gain or  loss. 2012 federal tax amendment These distinctions are essential to correctly arrive at your net capital gain or loss. 2012 federal tax amendment Capital losses are allowed in full against capital gains plus up to $3,000 of ordinary income. 2012 federal tax amendment See Capital Gains Tax Rates, later. 2012 federal tax amendment Holding period. 2012 federal tax amendment   To figure if you held property longer than 1 year, start counting on the day following the day you acquired the property. 2012 federal tax amendment The day you disposed of the property is part of your holding period. 2012 federal tax amendment Example. 2012 federal tax amendment If you bought an asset on June 19, 2012, you should start counting on June 20, 2012. 2012 federal tax amendment If you sold the asset on June 19, 2013, your holding period is not longer than 1 year, but if you sold it on June 20, 2013, your holding period is longer than 1 year. 2012 federal tax amendment Patent property. 2012 federal tax amendment   If you dispose of patent property, you generally are considered to have held the property longer than 1 year, no matter how long you actually held it. 2012 federal tax amendment For more information, see Patents in chapter 2. 2012 federal tax amendment Inherited property. 2012 federal tax amendment   If you inherit property, you are considered to have held the property longer than 1 year, regardless of how long you actually held it. 2012 federal tax amendment Installment sale. 2012 federal tax amendment   The gain from an installment sale of an asset qualifying for long-term capital gain treatment in the year of sale continues to be long term in later tax years. 2012 federal tax amendment If it is short term in the year of sale, it continues to be short term when payments are received in later tax years. 2012 federal tax amendment    The date the installment payment is received determines the capital gains rate that should be applied not the date the asset was sold under an installment contract. 2012 federal tax amendment Nontaxable exchange. 2012 federal tax amendment   If you acquire an asset in exchange for another asset and your basis for the new asset is figured, in whole or in part, by using your basis in the old property, the holding period of the new property includes the holding period of the old property. 2012 federal tax amendment That is, it begins on the same day as your holding period for the old property. 2012 federal tax amendment Example. 2012 federal tax amendment You bought machinery on December 4, 2012. 2012 federal tax amendment On June 4, 2013, you traded this machinery for other machinery in a nontaxable exchange. 2012 federal tax amendment On December 5, 2013, you sold the machinery you got in the exchange. 2012 federal tax amendment Your holding period for this machinery began on December 5, 2012. 2012 federal tax amendment Therefore, you held it longer than 1 year. 2012 federal tax amendment Corporate liquidation. 2012 federal tax amendment   The holding period for property you receive in a liquidation generally starts on the day after you receive it if gain or loss is recognized. 2012 federal tax amendment Profit-sharing plan. 2012 federal tax amendment   The holding period of common stock withdrawn from a qualified contributory profit-sharing plan begins on the day following the day the plan trustee delivered the stock to the transfer agent with instructions to reissue the stock in your name. 2012 federal tax amendment Gift. 2012 federal tax amendment   If you receive a gift of property and your basis in it is figured using the donor's basis, your holding period includes the donor's holding period. 2012 federal tax amendment For more information on basis, see Publication 551, Basis of Assets. 2012 federal tax amendment Real property. 2012 federal tax amendment   To figure how long you held real property, start counting on the day after you received title to it or, if earlier, the day after you took possession of it and assumed the burdens and privileges of ownership. 2012 federal tax amendment   However, taking possession of real property under an option agreement is not enough to start the holding period. 2012 federal tax amendment The holding period cannot start until there is an actual contract of sale. 2012 federal tax amendment The holding period of the seller cannot end before that time. 2012 federal tax amendment Repossession. 2012 federal tax amendment   If you sell real property but keep a security interest in it and then later repossess it, your holding period for a later sale includes the period you held the property before the original sale, as well as the period after the repossession. 2012 federal tax amendment Your holding period does not include the time between the original sale and the repossession. 2012 federal tax amendment That is, it does not include the period during which the first buyer held the property. 2012 federal tax amendment Nonbusiness bad debts. 2012 federal tax amendment   Nonbusiness bad debts are short-term capital losses. 2012 federal tax amendment For information on nonbusiness bad debts, see chapter 4 of Publication 550. 2012 federal tax amendment    Net Gain or Loss The totals for short-term capital gains and losses and the totals for long-term capital gains and losses must be figured separately. 2012 federal tax amendment Net short-term capital gain or loss. 2012 federal tax amendment   Combine your short-term capital gains and losses, including your share of short-term capital gains or losses from partnerships, S corporations, and fiduciaries and any short-term capital loss carryover. 2012 federal tax amendment Do this by adding all your short-term capital gains. 2012 federal tax amendment Then add all your short-term capital losses. 2012 federal tax amendment Subtract the lesser total from the other. 2012 federal tax amendment The result is your net short-term capital gain or loss. 2012 federal tax amendment Net long-term capital gain or loss. 2012 federal tax amendment   Follow the same steps to combine your long-term capital gains and losses. 2012 federal tax amendment Include the following items. 2012 federal tax amendment Net section 1231 gain from Part I, Form 4797, after any adjustment for nonrecaptured section 1231 losses from prior tax years. 2012 federal tax amendment Capital gain distributions from regulated investment companies (mutual funds) and real estate investment trusts. 2012 federal tax amendment Your share of long-term capital gains or losses from partnerships, S corporations, and fiduciaries. 2012 federal tax amendment Any long-term capital loss carryover. 2012 federal tax amendment The result from combining these items with other long-term capital gains and losses is your net long-term capital gain or loss. 2012 federal tax amendment Net gain. 2012 federal tax amendment   If the total of your capital gains is more than the total of your capital losses, the difference is taxable. 2012 federal tax amendment Different tax rates may apply to the part that is a net capital gain. 2012 federal tax amendment See Capital Gains Tax Rates, later. 2012 federal tax amendment Net loss. 2012 federal tax amendment   If the total of your capital losses is more than the total of your capital gains, the difference is deductible. 2012 federal tax amendment But there are limits on how much loss you can deduct and when you can deduct it. 2012 federal tax amendment See Treatment of Capital Losses, next. 2012 federal tax amendment    Treatment of Capital Losses If your capital losses are more than your capital gains, you can deduct the difference as a capital loss deduction even if you do not have ordinary income to offset it. 2012 federal tax amendment The yearly limit on the amount of the capital loss you can deduct is $3,000 ($1,500 if you are married and file a separate return). 2012 federal tax amendment Table 4-2. 2012 federal tax amendment Holding Period for Different Types of Acquisitions Type of acquisition: When your holding period starts: Stocks and bonds bought on a securities market Day after trading date you bought security. 2012 federal tax amendment Ends on trading date you sold security. 2012 federal tax amendment U. 2012 federal tax amendment S. 2012 federal tax amendment Treasury notes and bonds If bought at auction, day after notification of bid acceptance. 2012 federal tax amendment If bought through subscription, day after subscription was submitted. 2012 federal tax amendment Nontaxable exchanges Day after date you acquired old property. 2012 federal tax amendment Gift If your basis is giver's adjusted basis, same day as giver's holding period began. 2012 federal tax amendment If your basis is FMV, day after date of gift. 2012 federal tax amendment Real property bought Generally, day after date you received title to the property. 2012 federal tax amendment Real property repossessed Day after date you originally received title to the property, but does not include time between the original sale and date of repossession. 2012 federal tax amendment Capital loss carryover. 2012 federal tax amendment   Generally, you have a capital loss carryover if either of the following situations applies to you. 2012 federal tax amendment Your net loss is more than the yearly limit. 2012 federal tax amendment Your taxable income without your deduction for exemptions is less than zero. 2012 federal tax amendment If either of these situations applies to you for 2013, see Capital Losses under Reporting Capital Gains and Losses in chapter 4 of Publication 550 to figure the amount you can carryover to 2014. 2012 federal tax amendment Example. 2012 federal tax amendment Bob and Gloria Sampson sold property in 2013. 2012 federal tax amendment The sale resulted in a capital loss of $7,000. 2012 federal tax amendment The Sampsons had no other capital transactions. 2012 federal tax amendment On their joint 2013 return, the Sampsons deduct $3,000, the yearly limit. 2012 federal tax amendment They had taxable income of $2,000. 2012 federal tax amendment The unused part of the loss, $4,000 ($7,000 − $3,000), is carried over to 2014. 2012 federal tax amendment If the Sampsons' capital loss had been $2,000, it would not have been more than the yearly limit. 2012 federal tax amendment Their capital loss deduction would have been $2,000. 2012 federal tax amendment They would have no carryover to 2014. 2012 federal tax amendment Short-term and long-term losses. 2012 federal tax amendment   When you carry over a loss, it retains its original character as either long term or short term. 2012 federal tax amendment A short-term loss you carry over to the next tax year is added to short-term losses occurring in that year. 2012 federal tax amendment A long-term loss you carry over to the next tax year is added to long-term losses occurring in that year. 2012 federal tax amendment A long-term capital loss you carry over to the next year reduces that year's long-term gains before its short-term gains. 2012 federal tax amendment   If you have both short-term and long-term losses, your short-term losses are used first against your allowable capital loss deduction. 2012 federal tax amendment If, after using your short-term losses, you have not reached the limit on the capital loss deduction, use your long-term losses until you reach the limit. 2012 federal tax amendment To figure your capital loss carryover from 2013 to 2014 use the Capital Loss Carryover Worksheet in the 2013 Instructions for Schedule D (Form 1040). 2012 federal tax amendment Joint and separate returns. 2012 federal tax amendment   On a joint return, the capital gains and losses of spouses are figured as the gains and losses of an individual. 2012 federal tax amendment If you are married and filing a separate return, your yearly capital loss deduction is limited to $1,500. 2012 federal tax amendment Neither you nor your spouse can deduct any part of the other's loss. 2012 federal tax amendment   If you and your spouse once filed separate returns and are now filing a joint return, combine your separate capital loss carryovers. 2012 federal tax amendment However, if you and your spouse once filed jointly and are now filing separately, any capital loss carryover from the joint return can be deducted only on the return of the spouse who actually had the loss. 2012 federal tax amendment Death of taxpayer. 2012 federal tax amendment   Capital losses cannot be carried over after a taxpayer's death. 2012 federal tax amendment They are deductible only on the final income tax return filed on the decedent's behalf. 2012 federal tax amendment The yearly limit discussed earlier still applies in this situation. 2012 federal tax amendment Even if the loss is greater than the limit, the decedent's estate cannot deduct the difference or carry it over to following years. 2012 federal tax amendment Corporations. 2012 federal tax amendment   A corporation can deduct capital losses only up to the amount of its capital gains. 2012 federal tax amendment In other words, if a corporation has a net capital loss, it cannot be deducted in the current tax year. 2012 federal tax amendment It must be carried to other tax years and deducted from capital gains occurring in those years. 2012 federal tax amendment For more information, see Publication 542. 2012 federal tax amendment Capital Gains Tax Rates The tax rates that apply to a net capital gain are generally lower than the tax rates that apply to other income. 2012 federal tax amendment These lower rates are called the maximum capital gains rates. 2012 federal tax amendment The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss. 2012 federal tax amendment For 2013, the maximum tax rates for individuals are 0%, 15%, 20%, 25%, and 28%. 2012 federal tax amendment Also, individuals, use the Qualified Dividends and Capital Gain Worksheet in the Instructions for Form 1040, or the Schedule D Tax Computation Worksheet in the Instructions for Schedule D (Form 1040) (whichever applies) to figure your tax if you have qualified dividends or net capital gain. 2012 federal tax amendment For more information, see chapter 4 of Publication 550. 2012 federal tax amendment Also see the Instructions for Schedule D (Form 1040). 2012 federal tax amendment Unrecaptured section 1250 gain. 2012 federal tax amendment   Generally, this is the part of any long-term capital gain on section 1250 property (real property) that is due to depreciation. 2012 federal tax amendment Unrecaptured section 1250 gain cannot be more than the net section 1231 gain or include any gain otherwise treated as ordinary income. 2012 federal tax amendment Use the worksheet in the Schedule D instructions to figure your unrecaptured section 1250 gain. 2012 federal tax amendment For more information about section 1250 property and net section 1231 gain, see chapter 3. 2012 federal tax amendment Form 4797 Use Form 4797 to report: The sale or exchange of: Property used in your trade or business; Depreciable and amortizable property; Oil, gas, geothermal, or other mineral properties; and Section 126 property. 2012 federal tax amendment The involuntary conversion (from other than casualty or theft) of property used in your trade or business and capital assets held in connection with a trade or business or a transaction entered into for profit. 2012 federal tax amendment The disposition of noncapital assets (other than inventory or property held primarily for sale to customers in the ordinary course of your trade or business). 2012 federal tax amendment The disposition of capital assets not reported on Schedule D. 2012 federal tax amendment The gain or loss (including any related recapture) for partners and S corporation shareholders from certain section 179 property dispositions by partnerships (other than electing large partnerships) and S corporations. 2012 federal tax amendment The computation of recapture amounts under sections 179 and 280F(b)(2) when the business use of section 179 or listed property decreases to 50% or less. 2012 federal tax amendment Gains or losses treated as ordinary gains or losses, if you are a trader in securities or commodities and made a mark-to-market election under Internal Revenue Code section 475(f). 2012 federal tax amendment You can use Form 4797 with Form 1040, 1065, 1120, or 1120S. 2012 federal tax amendment Section 1231 gains and losses. 2012 federal tax amendment   Show any section 1231 gains and losses in Part I. 2012 federal tax amendment Carry a net gain to Schedule D (Form 1040) as a long-term capital gain. 2012 federal tax amendment Carry a net loss to Part II of Form 4797 as an ordinary loss. 2012 federal tax amendment   If you had any nonrecaptured net section 1231 losses from the preceding 5 tax years, reduce your net gain by those losses and report the amount of the reduction as an ordinary gain in Part II. 2012 federal tax amendment Report any remaining gain on Schedule D (Form 1040). 2012 federal tax amendment See Section 1231 Gains and Losses in chapter 3. 2012 federal tax amendment Ordinary gains and losses. 2012 federal tax amendment   Show any ordinary gains and losses in Part II. 2012 federal tax amendment This includes a net loss or a recapture of losses from prior years figured in Part I of Form 4797. 2012 federal tax amendment It also includes ordinary gain figured in Part III. 2012 federal tax amendment Mark-to-market election. 2012 federal tax amendment   If you made a mark-to-market election, you should report all gains and losses from trading as ordinary gains and losses in Part II of Form 4797, instead of as capital gains and losses on Form 8949 and Schedule D (Form 1040). 2012 federal tax amendment See the Instructions for Form 4797. 2012 federal tax amendment Also see Special Rules for Traders in Securities, in chapter 4 of Publication 550. 2012 federal tax amendment Ordinary income from depreciation. 2012 federal tax amendment   Figure the ordinary income from depreciation on personal property and additional depreciation on real property (as discussed in chapter 3) in Part III. 2012 federal tax amendment Carry the ordinary income to Part II of Form 4797 as an ordinary gain. 2012 federal tax amendment Carry any remaining gain to Part I as section 1231 gain, unless it is from a casualty or theft. 2012 federal tax amendment Carry any remaining gain from a casualty or theft to Form 4684. 2012 federal tax amendment Prev  Up  Next   Home   More 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The 2012 Federal Tax Amendment

2012 federal tax amendment 4. 2012 federal tax amendment   Detailed Examples Table of Contents These examples use actual forms to help you prepare your income tax return. 2012 federal tax amendment However, the information shown on the filled-in forms is not from any actual person or scenario. 2012 federal tax amendment Example 1—Mortgage loan modification. 2012 federal tax amendment    In 2007, Nancy Oak bought a main home for $435,000. 2012 federal tax amendment Nancy took out a $420,000 mortgage loan to buy the home and made a down payment of $15,000. 2012 federal tax amendment The loan was secured by the home. 2012 federal tax amendment The mortgage loan was a recourse debt, meaning that Nancy was personally liable for the debt. 2012 federal tax amendment 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. 2012 federal tax amendment    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. 2012 federal tax amendment The FMV of Nancy's home at the time of the refinancing was $500,000. 2012 federal tax amendment 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. 2012 federal tax amendment 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. 2012 federal tax amendment   In 2013, Nancy was unable to make her mortgage loan payments. 2012 federal tax amendment 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. 2012 federal tax amendment Nancy was neither insolvent nor in bankruptcy at the time of the loan modification. 2012 federal tax amendment   Nancy received a 2013 Form 1099-C from her bank in January 2014 showing canceled debt of $40,000 in box 2. 2012 federal tax amendment Identifiable event code "F" appears in box 6. 2012 federal tax amendment This box shows the reason the creditor has filed Form 1099-C. 2012 federal tax amendment 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. 2012 federal tax amendment Nancy determines that the only exception or exclusion that applies to her is the qualified principal residence indebtedness exclusion. 2012 federal tax amendment   Next, Nancy determines the amount, if any, of the $40,000 of canceled debt that was qualified principal residence indebtedness. 2012 federal tax amendment 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. 2012 federal tax amendment 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. 2012 federal tax amendment 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). 2012 federal tax amendment   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. 2012 federal tax amendment 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). 2012 federal tax amendment Nancy must also include the $35,000 nonqualified debt portion in income on Form 1040, line 21. 2012 federal tax amendment You can see Nancy's Form 1099-C and a portion of her Form 1040 below. 2012 federal tax amendment Nancy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. 2012 federal tax amendment Please click the link to view the image. 2012 federal tax amendment Form 1099-C, Cancellation of Debt Nancy's 2013 Form 1040 This image is too large to be displayed in the current screen. 2012 federal tax amendment Please click the link to view the image. 2012 federal tax amendment Form 1040, U. 2012 federal tax amendment S. 2012 federal tax amendment Individual Income Tax Nancy's Form 982 This image is too large to be displayed in the current screen. 2012 federal tax amendment Please click the link to view the image. 2012 federal tax amendment Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)              Example 2—Mortgage loan foreclosure. 2012 federal tax amendment    In 2005, John and Mary Elm bought a main home for $335,000. 2012 federal tax amendment John and Mary took out a $320,000 mortgage loan to buy the home and made a down payment of $15,000. 2012 federal tax amendment The loan was secured by the home and is a recourse debt, meaning John and Mary are personally liable for the debt. 2012 federal tax amendment   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. 2012 federal tax amendment 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. 2012 federal tax amendment   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. 2012 federal tax amendment Identifiable event code "D" appears in box 6. 2012 federal tax amendment This box shows the reason the creditor has filed Form 1099-C. 2012 federal tax amendment 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. 2012 federal tax amendment In this example, John and Mary meet both the insolvency and qualified principal residence indebtedness exclusions. 2012 federal tax amendment Their sample Form 1099-C is shown on this page. 2012 federal tax amendment   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). 2012 federal tax amendment 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. 2012 federal tax amendment   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). 2012 federal tax amendment Instead, John and Mary check box 1e of Form 982 to exclude the canceled debt under the qualified principal residence exclusion. 2012 federal tax amendment 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. 2012 federal tax amendment As a result, John and Mary enter the full $25,000 of canceled debt on line 2 of Form 982. 2012 federal tax amendment 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. 2012 federal tax amendment Thus, John and Mary leave line 10b of Form 982 blank. 2012 federal tax amendment   John and Mary must also determine whether they have a gain or loss from the foreclosure. 2012 federal tax amendment John and Mary complete Table 1-1 (shown below) and find that they have a $45,000 loss from the foreclosure. 2012 federal tax amendment Because this loss relates to their home, it is a nondeductible loss. 2012 federal tax amendment   John and Mary's Form 1099-C, Insolvency Worksheet, and Form 982 follow. 2012 federal tax amendment John and Mary's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. 2012 federal tax amendment Please click the link to view the image. 2012 federal tax amendment Form 1099-C, Cancellation of Debt Table 1-1. 2012 federal tax amendment Worksheet for Foreclosures and Repossessions (for John and Mary Elm) Part 1. 2012 federal tax amendment Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). 2012 federal tax amendment Otherwise, go to Part 2. 2012 federal tax amendment 1. 2012 federal tax amendment 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. 2012 federal tax amendment 00 2. 2012 federal tax amendment Enter the fair market value of the transferred property $290,000. 2012 federal tax amendment 00 3. 2012 federal tax amendment Ordinary income from the cancellation of debt upon foreclosure or repossession. 2012 federal tax amendment * Subtract line 2 from line 1. 2012 federal tax amendment If less than zero, enter zero. 2012 federal tax amendment Next, go to Part 2 $ 25,000. 2012 federal tax amendment 00 Part 2. 2012 federal tax amendment Gain or loss from foreclosure or repossession. 2012 federal tax amendment   4. 2012 federal tax amendment Enter the smaller of line 1 or line 2. 2012 federal tax amendment 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. 2012 federal tax amendment 00 5. 2012 federal tax amendment Enter any proceeds you received from the foreclosure sale   6. 2012 federal tax amendment Add line 4 and line 5 $290,000. 2012 federal tax amendment 00 7. 2012 federal tax amendment Enter the adjusted basis of the transferred property $335,000. 2012 federal tax amendment 00 8. 2012 federal tax amendment Gain or loss from foreclosure or repossession. 2012 federal tax amendment Subtract line 7 from line 6 ($ 45,000. 2012 federal tax amendment 00) * The income may not be taxable. 2012 federal tax amendment See chapter 1 for more details. 2012 federal tax amendment Insolvency Worksheet—John and Mary Elm Date debt was canceled (mm/dd/yy) 03/01/13 Part I. 2012 federal tax amendment 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. 2012 federal tax amendment Credit card debt $ 5,500 2. 2012 federal tax amendment 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. 2012 federal tax amendment Car and other vehicle loans $ 4. 2012 federal tax amendment Medical bills owed $ 5. 2012 federal tax amendment Student loans $ 6. 2012 federal tax amendment Accrued or past-due mortgage interest $ 7. 2012 federal tax amendment Accrued or past-due real estate taxes $ 8. 2012 federal tax amendment Accrued or past-due utilities (water, gas, electric) $ 9. 2012 federal tax amendment Accrued or past-due child care costs $ 10. 2012 federal tax amendment Federal or state income taxes remaining due (for prior tax years) $ 11. 2012 federal tax amendment Judgments $ 12. 2012 federal tax amendment Business debts (including those owed as a sole proprietor or partner) $ 13. 2012 federal tax amendment Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. 2012 federal tax amendment Other liabilities (debts) not included above $ 15. 2012 federal tax amendment Total liabilities immediately before the cancellation. 2012 federal tax amendment Add lines 1 through 14. 2012 federal tax amendment $ 320,500 Part II. 2012 federal tax amendment 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. 2012 federal tax amendment Cash and bank account balances $ 6,000 17. 2012 federal tax amendment 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. 2012 federal tax amendment Cars and other vehicles $ 19. 2012 federal tax amendment Computers $ 20. 2012 federal tax amendment Household goods and furnishings (for example, appliances, electronics, furniture, etc. 2012 federal tax amendment ) $ 21. 2012 federal tax amendment Tools $ 22. 2012 federal tax amendment Jewelry $ 23. 2012 federal tax amendment Clothing $ 24. 2012 federal tax amendment Books $ 25. 2012 federal tax amendment Stocks and bonds $ 26. 2012 federal tax amendment Investments in coins, stamps, paintings, or other collectibles $ 27. 2012 federal tax amendment Firearms, sports, photographic, and other hobby equipment $ 28. 2012 federal tax amendment Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 13,000 29. 2012 federal tax amendment Interest in a pension plan $ 30. 2012 federal tax amendment Interest in education accounts $ 31. 2012 federal tax amendment Cash value of life insurance $ 32. 2012 federal tax amendment Security deposits with landlords, utilities, and others $ 33. 2012 federal tax amendment Interests in partnerships $ 34. 2012 federal tax amendment Value of investment in a business $ 35. 2012 federal tax amendment Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. 2012 federal tax amendment Other assets not included above $ 37. 2012 federal tax amendment FMV of total assets immediately before the cancellation. 2012 federal tax amendment Add lines 16 through 36. 2012 federal tax amendment $ 309,000 Part III. 2012 federal tax amendment Insolvency 38. 2012 federal tax amendment Amount of Insolvency. 2012 federal tax amendment Subtract line 37 from line 15. 2012 federal tax amendment If zero or less, you are not insolvent. 2012 federal tax amendment $ 11,500 John and Mary's Form 982 This image is too large to be displayed in the current screen. 2012 federal tax amendment Please click the link to view the image. 2012 federal tax amendment 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. 2012 federal tax amendment    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. 2012 federal tax amendment 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. 2012 federal tax amendment Kathy and Frank are personally liable for the mortgage loan, which is secured by the home. 2012 federal tax amendment   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. 2012 federal tax amendment The lender foreclosed on the property and, on December 5, 2013, sold the property to another buyer for $1,750,000. 2012 federal tax amendment On December 26, 2013, the lender canceled the remaining debt. 2012 federal tax amendment Kathy and Frank have no tax attributes other than basis of personal-use property. 2012 federal tax amendment   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). 2012 federal tax amendment Identifiable event code "D" appears in box 6. 2012 federal tax amendment This box shows the reason the creditor has filed Form 1099-C. 2012 federal tax amendment 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. 2012 federal tax amendment Kathy and Frank are filing a joint return for 2013. 2012 federal tax amendment   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. 2012 federal tax amendment 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). 2012 federal tax amendment 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. 2012 federal tax amendment Because this loss relates to their home, it is a nondeductible loss. 2012 federal tax amendment   Because the lender later canceled the remaining amount of the debt, Kathy and Frank must also determine whether that canceled debt is taxable. 2012 federal tax amendment 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. 2012 federal tax amendment Kathy and Frank also had the $750,000 remaining balance on the mortgage loan at that time. 2012 federal tax amendment The household furnishings originally cost $30,000. 2012 federal tax amendment The car had been fully paid off (so there was no related outstanding debt) and was originally purchased for $16,000. 2012 federal tax amendment Kathy and Frank had no adjustments to the cost basis of the car. 2012 federal tax amendment Kathy and Frank had no other assets or liabilities at the time of the cancellation. 2012 federal tax amendment 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). 2012 federal tax amendment   At the beginning of 2014, Kathy and Frank had $9,000 in their savings account and $15,000 in credit card debt. 2012 federal tax amendment 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). 2012 federal tax amendment Kathy and Frank had no other assets or liabilities at that time. 2012 federal tax amendment Kathy and Frank no longer own the home because the lender foreclosed on it in 2013. 2012 federal tax amendment   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. 2012 federal tax amendment The maximum amount that Kathy and Frank can treat as qualified principal residence indebtedness is $2,000,000. 2012 federal tax amendment 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. 2012 federal tax amendment Because only a part of the loan is qualified principal residence indebtedness, Kathy and Frank must apply the ordering rule to the canceled debt. 2012 federal tax amendment 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). 2012 federal tax amendment 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. 2012 federal tax amendment   Kathy and Frank do not elect to have the insolvency exclusion apply instead of the qualified principal residence exclusion. 2012 federal tax amendment Nonetheless, they can still apply the insolvency exclusion to the $500,000 nonqualified debt because it is not qualified principal residence indebtedness. 2012 federal tax amendment 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. 2012 federal tax amendment 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). 2012 federal tax amendment   Next, Kathy and Frank reduce their tax attributes using Part II of Form 982. 2012 federal tax amendment 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. 2012 federal tax amendment Thus, Kathy and Frank leave line 10b of Form 982 blank. 2012 federal tax amendment However, Kathy and Frank are also excluding nonqualified debt under the insolvency exclusion. 2012 federal tax amendment 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. 2012 federal tax amendment 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). 2012 federal tax amendment 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. 2012 federal tax amendment Kathy and Frank reduce the basis in the car by $14,956. 2012 federal tax amendment 52 ($43,000 x $16,000/$46,000). 2012 federal tax amendment And they reduce the basis in the household furnishings by $28,043. 2012 federal tax amendment 48 ($43,000 x $30,000/$46,000). 2012 federal tax amendment   Following are Kathy and Frank's sample forms and worksheets. 2012 federal tax amendment Frank and Kathy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. 2012 federal tax amendment Please click the link to view the image. 2012 federal tax amendment Form 1099-C, Cancellation of Debt Table 1-1. 2012 federal tax amendment Worksheet for Foreclosures and Repossessions (for Frank and Kathy Willow) Part 1. 2012 federal tax amendment Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). 2012 federal tax amendment Otherwise, go to Part 2. 2012 federal tax amendment 1. 2012 federal tax amendment 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. 2012 federal tax amendment 00 2. 2012 federal tax amendment Enter the fair market value of the transferred property $1,750,000. 2012 federal tax amendment 00 3. 2012 federal tax amendment Ordinary income from the cancellation of debt upon foreclosure or repossession. 2012 federal tax amendment * Subtract line 2 from line 1. 2012 federal tax amendment If less than zero, enter zero. 2012 federal tax amendment Next, go to Part 2 $0. 2012 federal tax amendment 00 Part 2. 2012 federal tax amendment Gain or loss from foreclosure or repossession. 2012 federal tax amendment   4. 2012 federal tax amendment Enter the smaller of line 1 or line 2. 2012 federal tax amendment 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. 2012 federal tax amendment $1,750,000. 2012 federal tax amendment 00 5. 2012 federal tax amendment Enter any proceeds you received from the foreclosure sale   6. 2012 federal tax amendment Add line 4 and line 5 $1,750,000. 2012 federal tax amendment 00 7. 2012 federal tax amendment Enter the adjusted basis of the transferred property $3,000,000. 2012 federal tax amendment 00 8. 2012 federal tax amendment Gain or loss from foreclosure or repossession. 2012 federal tax amendment Subtract line 7 from line 6 ($1,250,000. 2012 federal tax amendment 00) * The income may not be taxable. 2012 federal tax amendment See chapter 1 for more details. 2012 federal tax amendment    Insolvency Worksheet—Frank and Kathy Willow Date debt was canceled (mm/dd/yy) 12/26/13 Part I. 2012 federal tax amendment 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. 2012 federal tax amendment Credit card debt $ 18,000 2. 2012 federal tax amendment 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. 2012 federal tax amendment Car and other vehicle loans $ 4. 2012 federal tax amendment Medical bills owed $ 5. 2012 federal tax amendment Student loans $ 6. 2012 federal tax amendment Accrued or past-due mortgage interest $ 7. 2012 federal tax amendment Accrued or past-due real estate taxes $ 8. 2012 federal tax amendment Accrued or past-due utilities (water, gas, electric) $ 9. 2012 federal tax amendment Accrued or past-due child care costs $ 10. 2012 federal tax amendment Federal or state income taxes remaining due (for prior tax years) $ 11. 2012 federal tax amendment Judgments $ 12. 2012 federal tax amendment Business debts (including those owed as a sole proprietor or partner) $ 13. 2012 federal tax amendment Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. 2012 federal tax amendment Other liabilities (debts) not included above $ 15. 2012 federal tax amendment Total liabilities immediately before the cancellation. 2012 federal tax amendment Add lines 1 through 14. 2012 federal tax amendment $ 768,000 Part II. 2012 federal tax amendment 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. 2012 federal tax amendment Cash and bank account balances $ 15,000 17. 2012 federal tax amendment 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. 2012 federal tax amendment Cars and other vehicles $ 10,000 19. 2012 federal tax amendment Computers $ 20. 2012 federal tax amendment Household goods and furnishings (for example, appliances, electronics, furniture, etc. 2012 federal tax amendment ) $ 17,000 21. 2012 federal tax amendment Tools $ 22. 2012 federal tax amendment Jewelry $ 23. 2012 federal tax amendment Clothing $ 24. 2012 federal tax amendment Books $ 25. 2012 federal tax amendment Stocks and bonds $ 26. 2012 federal tax amendment Investments in coins, stamps, paintings, or other collectibles $ 27. 2012 federal tax amendment Firearms, sports, photographic, and other hobby equipment $ 28. 2012 federal tax amendment Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 29. 2012 federal tax amendment Interest in a pension plan $ 30. 2012 federal tax amendment Interest in education accounts $ 31. 2012 federal tax amendment Cash value of life insurance $ 32. 2012 federal tax amendment Security deposits with landlords, utilities, and others $ 33. 2012 federal tax amendment Interests in partnerships $ 34. 2012 federal tax amendment Value of investment in a business $ 35. 2012 federal tax amendment Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. 2012 federal tax amendment Other assets not included above $ 37. 2012 federal tax amendment FMV of total assets immediately before the cancellation. 2012 federal tax amendment Add lines 16 through 36. 2012 federal tax amendment $ 42,000 Part III. 2012 federal tax amendment Insolvency 38. 2012 federal tax amendment Amount of Insolvency. 2012 federal tax amendment Subtract line 37 from line 15. 2012 federal tax amendment If zero or less, you are not insolvent. 2012 federal tax amendment $ 726,000    Frank and Kathy's Form 982 This image is too large to be displayed in the current screen. 2012 federal tax amendment Please click the link to view the image. 2012 federal tax amendment Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Prev  Up  Next   Home   More Online Publications