Qualified principal residence indebtedness for Form 982

[JG EA]

I have a situation where the qualified principal residence indebtedness does not reduce the cancelled debt nor does the insolvency get rid of the rest. There is a substantial balance due.

Others have told my client that the qualified principal residence indebtedness would definitely work because of the $2 million. It doesn't because of refinancing many times and taking more from the FMV than the home was worth. So, only a portion (original debt) works.

I'm wondering if I should suggest taking their information and starting over with someone else. Because there is a lack of confidence in what I'm telling them. The thing that is making this hard is that I know it is unlikely the result would never be quesitoned If the whole amount was excluded on Form 982.

I'm wondering about the ethics of making this suggestion.

[JohnH]

I think telling the client his situation isn't one you feel comfortable handling is an acceptable approach. I've done it before when I didn't trust them, when I sensed they didn't have confidence in me, or when they had a unique or unusual situation I just didn't have the time or interest in researching. I've found it easy enough to tell them they might be better off taking it to someone with more experience handling this type of situation - no sense in paying me to re-invent the wheel.

What they do with the info once they're out your door isn't your problem. (As long as you don't coach them as they leave)