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How To Amend My Tax Return

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How To Amend My Tax Return

How to amend my tax return Index A Abatement of interest (see Interest, abatement) Appeal rights, Appeal Rights, Appeals to the Courts, Tax Court, District Court and Court of Federal Claims (see also Tax Court) Assistance (see Tax help) Authorization, third party, Third party authorization. How to amend my tax return B Burden of proof, Burden of proof. How to amend my tax return C Civil action (see Waivers, tax suits, civil action) Claim for refund, Claims for Refund Disallowance, Explanation of Any Claim for Refund Disallowance Estates on installment method, Claim for refund by estates electing the installment method of payment. How to amend my tax return Periods of financial disability, Periods of financial disability. How to amend my tax return Comments on publication, Comments and suggestions. How to amend my tax return Communications, privileged, Confidentiality privilege. How to amend my tax return , Confidentiality privilege. How to amend my tax return Confidentiality, Confidentiality privilege. How to amend my tax return , Confidentiality privilege. How to amend my tax return D Disability (see Financial disability, periods of) Disaster areas, abatement of interest, Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions E Employment status, Tax Court review of, Jurisdiction for determination of employment status. How to amend my tax return Estates Claim for refund, Claim for refund by estates electing the installment method of payment. How to amend my tax return Examination of returns, Examination of Returns F Fast track mediation, Fast track mediation. How to amend my tax return Financial disability, periods of Claim for refund, Periods of financial disability. How to amend my tax return Form 8379, Injured spouse exception. How to amend my tax return 8857, Form 8857. How to amend my tax return Free tax services, Free help with your tax return. How to amend my tax return H Help (see Tax help) I Injured spouse, Injured spouse exception. How to amend my tax return Innocent spouse relief, Tax Court review of request for relief from joint and several liability on a joint return. How to amend my tax return , Relief from joint and several liability on a joint return. How to amend my tax return Installment agreement, Installment Agreement Request Installment method Estates, claim for refund by, Claim for refund by estates electing the installment method of payment. How to amend my tax return Interest Abatement Disaster areas, Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions Error or delay by IRS, Abatement of Interest Due to Error or Delay by the IRS Terrorist attacks, Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions Netting, overlapping underpayments and overpayments, Interest Netting Suspended, Suspension of interest and penalties. How to amend my tax return J Joint and several liability, relief from, Tax Court review of request for relief from joint and several liability on a joint return. How to amend my tax return , Relief from joint and several liability on a joint return. How to amend my tax return L Losses Disaster area, Disaster area claims for refund. How to amend my tax return Low Income Taxpayer Clinics, Low Income Taxpayer Clinics. How to amend my tax return M Mediation, fast track, Fast track mediation. How to amend my tax return More information, Useful Items - You may want to see: N Notice of deficiency Timely mailing, Suspension of interest and penalties. How to amend my tax return Notices Third party contacts, Notice of IRS contact of third parties. How to amend my tax return O Offer in compromise, Offer in Compromise Overpayments Offsets against state tax, Offset of past-due state income tax obligations against overpayments. How to amend my tax return P Penalties, suspended, Suspension of interest and penalties. How to amend my tax return Practitioners, federally authorized Confidential communications, Confidentiality privilege. How to amend my tax return , Confidentiality privilege. How to amend my tax return Presidentially declared disaster, Disaster area claims for refund. How to amend my tax return Publications (see Tax help) R Refund, Claims for Refund, Periods of financial disability. How to amend my tax return , Offset of past-due state income tax obligations against overpayments. How to amend my tax return Reduced, Reduced Refund Refund deadline postponement, Postponed refund deadlines. How to amend my tax return Refund or credit before court decision, Refund or Credit of Overpayments Before Final Determination Rights Communications, privileged, Confidentiality privilege. How to amend my tax return , Confidentiality privilege. How to amend my tax return Requests to waive, Prohibition on requests to taxpayers to give up rights to bring civil action. How to amend my tax return S Suggestions for publication, Comments and suggestions. How to amend my tax return T Tax Court, Appeals to the Courts, Tax Court Employment status, review of, Jurisdiction for determination of employment status. How to amend my tax return Innocent spouse relief, review of request for, Tax Court review of request for relief from joint and several liability on a joint return. How to amend my tax return Refund or credit before decision, Refund or Credit of Overpayments Before Final Determination Tax help, How To Get Tax Help Taxpayer Advocate, Taxpayer Advocate Service. How to amend my tax return Taxpayer Advocate Service, Taxpayer Advocate Service. How to amend my tax return Terrorist attacks, abatement of interest, Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions Third party authorization, Third party authorization. How to amend my tax return TTY/TDD information, How To Get Tax Help W Waivers Tax suits, civil action, Prohibition on requests to taxpayers to give up rights to bring civil action. How to amend my tax return Z Zero rate, overlapping periods of interest (see Interest, netting) Prev  Up     Home   More Online Publications
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Letter 2271C Frequently Asked Questions (FAQs)

What is the letter telling me?

This letter confirms your financial request for an Installment Agreement has been approved.  It explains the fees we charge for establishing your agreement.  It also explains what to do if you qualify for a Low Income Fee Reduction.  This letter can also request missing information need based on the financial you previously provided.

What do I have to do?

The letter tells you what your payment due date is. You should mail your payment to us 10 days prior to the due date.  It tells you what items you need to put on your check so it can be correctly identified and applied to your account. If the letter is requesting more information, please provid the requested information.

How much time do I have?

The letter tells you the date when you first payment is due or the date you should return the requested information.

What happens if I don't take any action?

If installment payments are not received as agreed or requested documentation is not received, we can proceed with enforcement action and may file a levy on your wages or bank account or file a lien on your personal property.

Who should I contact?

If you have any questions about this letter, call us at the number printed in the letter. The person who answers the phone will assist you.

What if I don't agree or have already taken corrective action?

If you do not agree with this letter, call us immediately at the number included. We will do our best to help you.  If you have called us about this matter before, but we did not correct the problem, you may want to contact the Office of the Taxpayer Advocate.

Page Last Reviewed or Updated: 30-Jan-2014

The How To Amend My Tax Return

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