principal residence is used for Home Office - COD Income?

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  • jmc
    Senior Member
    • Jun 2005
    • 106

    #1

    principal residence is used for Home Office - COD Income?

    Generally, there is no Cancellation of Debt Income, when principal residence is foreclosed and the loan is considered Non-recourse loan.

    If the 60% of the principal residence is used for Home Office, is there any COD Income? How should I calculate?
    I could not find this case from IRS Publications.
  • FEDUKE404
    Senior Member
    • May 2007
    • 3649

    #2
    Fuzzy vision

    Originally posted by jmc
    Generally, there is no Cancellation of Debt Income, when principal residence is foreclosed and the loan is considered Non-recourse loan.

    If the 60% of the principal residence is used for Home Office, is there any COD Income? How should I calculate?
    I could not find this case from IRS Publications.
    Did I see 60% ?? Or does this guy/gal just incidentally live at the office??

    Comment

    • solomon
      Senior Member
      • Aug 2006
      • 1012

      #3
      Originally posted by jmc
      Generally, there is no Cancellation of Debt Income, when principal residence is foreclosed and the loan is considered Non-recourse loan.

      If the 60% of the principal residence is used for Home Office, is there any COD Income? How should I calculate?
      I could not find this case from IRS Publications.
      I am with FEDUKE - surprised has not been audited yet.

      At a minimum there would be unrecaptured 1250 gain. That is to say, that amount could not be excluded on any gain.
      Last edited by solomon; 02-07-2011, 08:44 PM.

      Comment

      • erchess
        Senior Member
        • Jan 2007
        • 3513

        #4
        Partial Answer

        I am sure that 40% of the canceled debt is excludable from income as qualified residential debt. For the home office you might be able to include it as well or you might be able to treat it as Qualified Real Property Business Debt. See Ch 5 of Pub 334. On the other hand the 60% may have to be included in income unless the taxpayer meets another exception such as being insolvent at the time the debt was forgiven.

        Solomon posted while I was writing the above and of course he is right about the Section 1250 gain.
        Last edited by erchess; 02-07-2011, 08:50 PM. Reason: Saw Solomon's Post

        Comment

        • zeros
          Senior Member
          • Dec 2006
          • 921

          #5
          FEDUKE: Yes, 60% OIH

          Originally posted by FEDUKE404
          Did I see 60% ?? Or does this guy/gal just incidentally live at the office??
          They live in one of the closets.

          Comment

          • David1980
            Senior Member
            • Feb 2008
            • 1703

            #6
            I think after 50% doesn't it become a office home instead of a home office?

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