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2010 Tax Amendment

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2010 Tax Amendment

2010 tax amendment 4. 2010 tax amendment   Detailed Examples Table of Contents These examples use actual forms to help you prepare your income tax return. 2010 tax amendment However, the information shown on the filled-in forms is not from any actual person or scenario. 2010 tax amendment Example 1—Mortgage loan modification. 2010 tax amendment    In 2007, Nancy Oak bought a main home for $435,000. 2010 tax amendment Nancy took out a $420,000 mortgage loan to buy the home and made a down payment of $15,000. 2010 tax amendment The loan was secured by the home. 2010 tax amendment The mortgage loan was a recourse debt, meaning that Nancy was personally liable for the debt. 2010 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. 2010 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. 2010 tax amendment The FMV of Nancy's home at the time of the refinancing was $500,000. 2010 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. 2010 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. 2010 tax amendment   In 2013, Nancy was unable to make her mortgage loan payments. 2010 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. 2010 tax amendment Nancy was neither insolvent nor in bankruptcy at the time of the loan modification. 2010 tax amendment   Nancy received a 2013 Form 1099-C from her bank in January 2014 showing canceled debt of $40,000 in box 2. 2010 tax amendment Identifiable event code "F" appears in box 6. 2010 tax amendment This box shows the reason the creditor has filed Form 1099-C. 2010 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. 2010 tax amendment Nancy determines that the only exception or exclusion that applies to her is the qualified principal residence indebtedness exclusion. 2010 tax amendment   Next, Nancy determines the amount, if any, of the $40,000 of canceled debt that was qualified principal residence indebtedness. 2010 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. 2010 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. 2010 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). 2010 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. 2010 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). 2010 tax amendment Nancy must also include the $35,000 nonqualified debt portion in income on Form 1040, line 21. 2010 tax amendment You can see Nancy's Form 1099-C and a portion of her Form 1040 below. 2010 tax amendment Nancy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. 2010 tax amendment Please click the link to view the image. 2010 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. 2010 tax amendment Please click the link to view the image. 2010 tax amendment Form 1040, U. 2010 tax amendment S. 2010 tax amendment Individual Income Tax Nancy's Form 982 This image is too large to be displayed in the current screen. 2010 tax amendment Please click the link to view the image. 2010 tax amendment Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)              Example 2—Mortgage loan foreclosure. 2010 tax amendment    In 2005, John and Mary Elm bought a main home for $335,000. 2010 tax amendment John and Mary took out a $320,000 mortgage loan to buy the home and made a down payment of $15,000. 2010 tax amendment The loan was secured by the home and is a recourse debt, meaning John and Mary are personally liable for the debt. 2010 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. 2010 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. 2010 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. 2010 tax amendment Identifiable event code "D" appears in box 6. 2010 tax amendment This box shows the reason the creditor has filed Form 1099-C. 2010 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. 2010 tax amendment In this example, John and Mary meet both the insolvency and qualified principal residence indebtedness exclusions. 2010 tax amendment Their sample Form 1099-C is shown on this page. 2010 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). 2010 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. 2010 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). 2010 tax amendment Instead, John and Mary check box 1e of Form 982 to exclude the canceled debt under the qualified principal residence exclusion. 2010 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. 2010 tax amendment As a result, John and Mary enter the full $25,000 of canceled debt on line 2 of Form 982. 2010 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. 2010 tax amendment Thus, John and Mary leave line 10b of Form 982 blank. 2010 tax amendment   John and Mary must also determine whether they have a gain or loss from the foreclosure. 2010 tax amendment John and Mary complete Table 1-1 (shown below) and find that they have a $45,000 loss from the foreclosure. 2010 tax amendment Because this loss relates to their home, it is a nondeductible loss. 2010 tax amendment   John and Mary's Form 1099-C, Insolvency Worksheet, and Form 982 follow. 2010 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. 2010 tax amendment Please click the link to view the image. 2010 tax amendment Form 1099-C, Cancellation of Debt Table 1-1. 2010 tax amendment Worksheet for Foreclosures and Repossessions (for John and Mary Elm) Part 1. 2010 tax amendment Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). 2010 tax amendment Otherwise, go to Part 2. 2010 tax amendment 1. 2010 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. 2010 tax amendment 00 2. 2010 tax amendment Enter the fair market value of the transferred property $290,000. 2010 tax amendment 00 3. 2010 tax amendment Ordinary income from the cancellation of debt upon foreclosure or repossession. 2010 tax amendment * Subtract line 2 from line 1. 2010 tax amendment If less than zero, enter zero. 2010 tax amendment Next, go to Part 2 $ 25,000. 2010 tax amendment 00 Part 2. 2010 tax amendment Gain or loss from foreclosure or repossession. 2010 tax amendment   4. 2010 tax amendment Enter the smaller of line 1 or line 2. 2010 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. 2010 tax amendment 00 5. 2010 tax amendment Enter any proceeds you received from the foreclosure sale   6. 2010 tax amendment Add line 4 and line 5 $290,000. 2010 tax amendment 00 7. 2010 tax amendment Enter the adjusted basis of the transferred property $335,000. 2010 tax amendment 00 8. 2010 tax amendment Gain or loss from foreclosure or repossession. 2010 tax amendment Subtract line 7 from line 6 ($ 45,000. 2010 tax amendment 00) * The income may not be taxable. 2010 tax amendment See chapter 1 for more details. 2010 tax amendment Insolvency Worksheet—John and Mary Elm Date debt was canceled (mm/dd/yy) 03/01/13 Part I. 2010 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. 2010 tax amendment Credit card debt $ 5,500 2. 2010 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. 2010 tax amendment Car and other vehicle loans $ 4. 2010 tax amendment Medical bills owed $ 5. 2010 tax amendment Student loans $ 6. 2010 tax amendment Accrued or past-due mortgage interest $ 7. 2010 tax amendment Accrued or past-due real estate taxes $ 8. 2010 tax amendment Accrued or past-due utilities (water, gas, electric) $ 9. 2010 tax amendment Accrued or past-due child care costs $ 10. 2010 tax amendment Federal or state income taxes remaining due (for prior tax years) $ 11. 2010 tax amendment Judgments $ 12. 2010 tax amendment Business debts (including those owed as a sole proprietor or partner) $ 13. 2010 tax amendment Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. 2010 tax amendment Other liabilities (debts) not included above $ 15. 2010 tax amendment Total liabilities immediately before the cancellation. 2010 tax amendment Add lines 1 through 14. 2010 tax amendment $ 320,500 Part II. 2010 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. 2010 tax amendment Cash and bank account balances $ 6,000 17. 2010 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. 2010 tax amendment Cars and other vehicles $ 19. 2010 tax amendment Computers $ 20. 2010 tax amendment Household goods and furnishings (for example, appliances, electronics, furniture, etc. 2010 tax amendment ) $ 21. 2010 tax amendment Tools $ 22. 2010 tax amendment Jewelry $ 23. 2010 tax amendment Clothing $ 24. 2010 tax amendment Books $ 25. 2010 tax amendment Stocks and bonds $ 26. 2010 tax amendment Investments in coins, stamps, paintings, or other collectibles $ 27. 2010 tax amendment Firearms, sports, photographic, and other hobby equipment $ 28. 2010 tax amendment Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 13,000 29. 2010 tax amendment Interest in a pension plan $ 30. 2010 tax amendment Interest in education accounts $ 31. 2010 tax amendment Cash value of life insurance $ 32. 2010 tax amendment Security deposits with landlords, utilities, and others $ 33. 2010 tax amendment Interests in partnerships $ 34. 2010 tax amendment Value of investment in a business $ 35. 2010 tax amendment Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. 2010 tax amendment Other assets not included above $ 37. 2010 tax amendment FMV of total assets immediately before the cancellation. 2010 tax amendment Add lines 16 through 36. 2010 tax amendment $ 309,000 Part III. 2010 tax amendment Insolvency 38. 2010 tax amendment Amount of Insolvency. 2010 tax amendment Subtract line 37 from line 15. 2010 tax amendment If zero or less, you are not insolvent. 2010 tax amendment $ 11,500 John and Mary's Form 982 This image is too large to be displayed in the current screen. 2010 tax amendment Please click the link to view the image. 2010 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. 2010 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. 2010 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. 2010 tax amendment Kathy and Frank are personally liable for the mortgage loan, which is secured by the home. 2010 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. 2010 tax amendment The lender foreclosed on the property and, on December 5, 2013, sold the property to another buyer for $1,750,000. 2010 tax amendment On December 26, 2013, the lender canceled the remaining debt. 2010 tax amendment Kathy and Frank have no tax attributes other than basis of personal-use property. 2010 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). 2010 tax amendment Identifiable event code "D" appears in box 6. 2010 tax amendment This box shows the reason the creditor has filed Form 1099-C. 2010 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. 2010 tax amendment Kathy and Frank are filing a joint return for 2013. 2010 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. 2010 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). 2010 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. 2010 tax amendment Because this loss relates to their home, it is a nondeductible loss. 2010 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. 2010 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. 2010 tax amendment Kathy and Frank also had the $750,000 remaining balance on the mortgage loan at that time. 2010 tax amendment The household furnishings originally cost $30,000. 2010 tax amendment The car had been fully paid off (so there was no related outstanding debt) and was originally purchased for $16,000. 2010 tax amendment Kathy and Frank had no adjustments to the cost basis of the car. 2010 tax amendment Kathy and Frank had no other assets or liabilities at the time of the cancellation. 2010 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). 2010 tax amendment   At the beginning of 2014, Kathy and Frank had $9,000 in their savings account and $15,000 in credit card debt. 2010 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). 2010 tax amendment Kathy and Frank had no other assets or liabilities at that time. 2010 tax amendment Kathy and Frank no longer own the home because the lender foreclosed on it in 2013. 2010 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. 2010 tax amendment The maximum amount that Kathy and Frank can treat as qualified principal residence indebtedness is $2,000,000. 2010 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. 2010 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. 2010 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). 2010 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. 2010 tax amendment   Kathy and Frank do not elect to have the insolvency exclusion apply instead of the qualified principal residence exclusion. 2010 tax amendment Nonetheless, they can still apply the insolvency exclusion to the $500,000 nonqualified debt because it is not qualified principal residence indebtedness. 2010 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. 2010 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). 2010 tax amendment   Next, Kathy and Frank reduce their tax attributes using Part II of Form 982. 2010 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. 2010 tax amendment Thus, Kathy and Frank leave line 10b of Form 982 blank. 2010 tax amendment However, Kathy and Frank are also excluding nonqualified debt under the insolvency exclusion. 2010 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. 2010 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). 2010 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. 2010 tax amendment Kathy and Frank reduce the basis in the car by $14,956. 2010 tax amendment 52 ($43,000 x $16,000/$46,000). 2010 tax amendment And they reduce the basis in the household furnishings by $28,043. 2010 tax amendment 48 ($43,000 x $30,000/$46,000). 2010 tax amendment   Following are Kathy and Frank's sample forms and worksheets. 2010 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. 2010 tax amendment Please click the link to view the image. 2010 tax amendment Form 1099-C, Cancellation of Debt Table 1-1. 2010 tax amendment Worksheet for Foreclosures and Repossessions (for Frank and Kathy Willow) Part 1. 2010 tax amendment Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). 2010 tax amendment Otherwise, go to Part 2. 2010 tax amendment 1. 2010 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. 2010 tax amendment 00 2. 2010 tax amendment Enter the fair market value of the transferred property $1,750,000. 2010 tax amendment 00 3. 2010 tax amendment Ordinary income from the cancellation of debt upon foreclosure or repossession. 2010 tax amendment * Subtract line 2 from line 1. 2010 tax amendment If less than zero, enter zero. 2010 tax amendment Next, go to Part 2 $0. 2010 tax amendment 00 Part 2. 2010 tax amendment Gain or loss from foreclosure or repossession. 2010 tax amendment   4. 2010 tax amendment Enter the smaller of line 1 or line 2. 2010 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. 2010 tax amendment $1,750,000. 2010 tax amendment 00 5. 2010 tax amendment Enter any proceeds you received from the foreclosure sale   6. 2010 tax amendment Add line 4 and line 5 $1,750,000. 2010 tax amendment 00 7. 2010 tax amendment Enter the adjusted basis of the transferred property $3,000,000. 2010 tax amendment 00 8. 2010 tax amendment Gain or loss from foreclosure or repossession. 2010 tax amendment Subtract line 7 from line 6 ($1,250,000. 2010 tax amendment 00) * The income may not be taxable. 2010 tax amendment See chapter 1 for more details. 2010 tax amendment    Insolvency Worksheet—Frank and Kathy Willow Date debt was canceled (mm/dd/yy) 12/26/13 Part I. 2010 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. 2010 tax amendment Credit card debt $ 18,000 2. 2010 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. 2010 tax amendment Car and other vehicle loans $ 4. 2010 tax amendment Medical bills owed $ 5. 2010 tax amendment Student loans $ 6. 2010 tax amendment Accrued or past-due mortgage interest $ 7. 2010 tax amendment Accrued or past-due real estate taxes $ 8. 2010 tax amendment Accrued or past-due utilities (water, gas, electric) $ 9. 2010 tax amendment Accrued or past-due child care costs $ 10. 2010 tax amendment Federal or state income taxes remaining due (for prior tax years) $ 11. 2010 tax amendment Judgments $ 12. 2010 tax amendment Business debts (including those owed as a sole proprietor or partner) $ 13. 2010 tax amendment Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. 2010 tax amendment Other liabilities (debts) not included above $ 15. 2010 tax amendment Total liabilities immediately before the cancellation. 2010 tax amendment Add lines 1 through 14. 2010 tax amendment $ 768,000 Part II. 2010 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. 2010 tax amendment Cash and bank account balances $ 15,000 17. 2010 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. 2010 tax amendment Cars and other vehicles $ 10,000 19. 2010 tax amendment Computers $ 20. 2010 tax amendment Household goods and furnishings (for example, appliances, electronics, furniture, etc. 2010 tax amendment ) $ 17,000 21. 2010 tax amendment Tools $ 22. 2010 tax amendment Jewelry $ 23. 2010 tax amendment Clothing $ 24. 2010 tax amendment Books $ 25. 2010 tax amendment Stocks and bonds $ 26. 2010 tax amendment Investments in coins, stamps, paintings, or other collectibles $ 27. 2010 tax amendment Firearms, sports, photographic, and other hobby equipment $ 28. 2010 tax amendment Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 29. 2010 tax amendment Interest in a pension plan $ 30. 2010 tax amendment Interest in education accounts $ 31. 2010 tax amendment Cash value of life insurance $ 32. 2010 tax amendment Security deposits with landlords, utilities, and others $ 33. 2010 tax amendment Interests in partnerships $ 34. 2010 tax amendment Value of investment in a business $ 35. 2010 tax amendment Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. 2010 tax amendment Other assets not included above $ 37. 2010 tax amendment FMV of total assets immediately before the cancellation. 2010 tax amendment Add lines 16 through 36. 2010 tax amendment $ 42,000 Part III. 2010 tax amendment Insolvency 38. 2010 tax amendment Amount of Insolvency. 2010 tax amendment Subtract line 37 from line 15. 2010 tax amendment If zero or less, you are not insolvent. 2010 tax amendment $ 726,000    Frank and Kathy's Form 982 This image is too large to be displayed in the current screen. 2010 tax amendment Please click the link to view the image. 2010 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
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Understanding Your CP53C Notice

We tried to direct deposit your refund, but the financial institution couldn’t process it. When refund payments are questionable, we review related returns to ensure the return is valid. We are researching your account, but it will take 8 to 10 weeks to complete our review and verify this refund.


What you need to do

  • You don’t need to do anything at this time.

You may want to

  • Call us at the toll-free number on the notice if you don’t receive your refund check or a follow-up letter within 10 weeks
  • Monitor your financial accounts

However, if you call us before 10 weeks have passed, we won’t have any information about the status of your refund.


Answers to Common Questions

Q. Why was my direct deposit refund returned to the IRS?

A. A financial institution will reject a refund for a variety of reasons. Most often, the personal information on the direct deposit doesn’t match its records: 

  • Name
  • SSN
  • Routing number

Q. Why could the refund review take up to 10 weeks?

A. We must research your account to determine if you are entitled to the refund. We try to balance customer service and tax compliance when we review tax returns. Refund timeframes are also affected by:

  • Bankruptcy
  • An open audit
  • A balance due on a related account (such as a different tax year)

Q. Will calling the IRS give me additional information or speed my refund?

A. No, calling us won’t speed up your refund. You don’t need to call us unless we send you a letter asking ask you to contact us. Our telephone assistors won’t be able to provide any additional information.


Tips for next year

If you request a direct deposit refund, be sure the account you specify is in your name (or your spouse’s if you have a joint refund).


If you changed your name as a result of a recent marriage or divorce, be sure you’ll want to take the necessary steps to ensure the name on your tax return matches the name registered with the Social Security Administration.


Never direct your refund to an account that belongs to a relative, friend, or tax return preparer.

Page Last Reviewed or Updated: 22-Jan-2014

Printable samples of this notice (PDF)

 

 

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
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The 2010 Tax Amendment

2010 tax amendment Index A Adjusted basis, Adjusted Basis Assessments For local benefits, Assessments for local benefits. 2010 tax amendment Homeowners association, Homeowners association assessments. 2010 tax amendment Assistance (see Tax help) B Basis, Basis C Certificate, mortgage credit, Who qualifies. 2010 tax amendment Construction, Construction. 2010 tax amendment Cooperatives, Special Rules for Cooperatives, Cooperative apartment. 2010 tax amendment Cost basis, Cost as Basis Credit Mortgage interest, Mortgage Interest Credit D Deduction Home mortgage interest, Deductible Mortgage Interest Real estate taxes, Deductible Real Estate Taxes E Emergency Homeowners' Loan Program, Hardest Hit Fund and Emergency Homeowners' Loan Programs Escrow accounts, Escrow accounts. 2010 tax amendment F Fire insurance premiums, Items not added to basis and not deductible. 2010 tax amendment Form 1098, Mortgage Interest Statement 8396, How to claim the credit. 2010 tax amendment , Figuring the Credit Free tax services, Free help with your tax return. 2010 tax amendment G Gift of home, Gift Ground rent, Ground rent. 2010 tax amendment H Help (see Tax help) HFA Hardest Hit Fund, Hardest Hit Fund and Emergency Homeowners' Loan Programs Home Acquisition debt, Home Acquisition Debt Inherited, Inheritance Mortgage interest, Home Mortgage Interest Purchase of, Purchase. 2010 tax amendment Received as gift, Gift Homeowners association assessments, Homeowners association assessments. 2010 tax amendment House payment, Your house payment. 2010 tax amendment Housing allowance, minister or military, Minister's or military housing allowance. 2010 tax amendment I Improvements, Improvements. 2010 tax amendment Inheritance, Inheritance Insurance, Nondeductible payments. 2010 tax amendment , Items not added to basis and not deductible. 2010 tax amendment Interest Home mortgage, Home Mortgage Interest Prepaid, Prepaid interest. 2010 tax amendment K Keeping records, Keeping Records L Late payment charge, Late payment charge on mortgage payment. 2010 tax amendment Local benefits, assessments for, Assessments for local benefits. 2010 tax amendment M MCC (Mortgage credit certificate), Who qualifies. 2010 tax amendment Minister's or military housing allowance, Minister's or military housing allowance. 2010 tax amendment Mortgage credit certificate (MCC), Who qualifies. 2010 tax amendment Mortgage debt forgiveness, Discharges of qualified principal residence indebtedness. 2010 tax amendment Mortgage insurance premiums, Mortgage Insurance Premiums Mortgage interest Credit, Mortgage Interest Credit Deduction, Deductible Mortgage Interest Late payment charge, Late payment charge on mortgage payment. 2010 tax amendment Paid at settlement, Mortgage Interest Paid at Settlement Refund, Refund of home mortgage interest. 2010 tax amendment , Refund of overpaid interest. 2010 tax amendment Statement, Mortgage Interest Statement Mortgage prepayment penalty, Mortgage prepayment penalty. 2010 tax amendment N Nondeductible payments, Nondeductible payments. 2010 tax amendment , Items not added to basis and not deductible. 2010 tax amendment P Points, Points Prepaid interest, Prepaid interest. 2010 tax amendment Publications (see Tax help) R Real estate taxes, Real Estate Taxes Deductible, Deductible Real Estate Taxes Paid at settlement or closing, Real estate taxes paid at settlement or closing. 2010 tax amendment , Real estate taxes. 2010 tax amendment Refund or rebate, Refund or rebate of real estate taxes. 2010 tax amendment Recordkeeping, Keeping Records Refund of Mortgage interest, Refund of home mortgage interest. 2010 tax amendment , Refund of overpaid interest. 2010 tax amendment Real estate taxes, Refund or rebate of real estate taxes. 2010 tax amendment Repairs, Repairs versus improvements. 2010 tax amendment S Sales taxes, Sales Taxes Settlement or closing costs Basis of home, Settlement or closing costs. 2010 tax amendment Mortgage interest, Mortgage Interest Paid at Settlement Real estate taxes, Real estate taxes paid at settlement or closing. 2010 tax amendment , Real estate taxes. 2010 tax amendment Stamp taxes, Transfer taxes (or stamp taxes). 2010 tax amendment Statement, mortgage interest, Mortgage Interest Statement T Tax help, How To Get Tax Help Taxes Real estate, Real Estate Taxes, Refund of real estate taxes. 2010 tax amendment Transfer taxes, Transfer taxes (or stamp taxes). 2010 tax amendment W What you can and cannot deduct, What You Can and Cannot Deduct Prev  Up     Home   More Online Publications