!099-C and Home Office

[NRA Girl]

My client received a 1099-C for the cancellation of debt and foreclosure of his home. The amount of debt cancelled was only $1,628.00 more than the FMV of his home. He had a home office that he began using in 2010. The depreciation that was taken for 2010 was $1,419.00. The basis of the building (business portion) was $57,657.00.

I m trying to find something in the IRS publications to help me calculate this transaction concerning the business portion of his COD. Any help or suggestions would be greatly appreciated.

Thank you,
Val

[JG EA]

My client received a 1099-C for the cancellation of debt and foreclosure of his home. The amount of debt cancelled was only $1,628.00 more than the FMV of his home. He had a home office that he began using in 2010. The depreciation that was taken for 2010 was $1,419.00. The basis of the building (business portion) was $57,657.00.

I m trying to find something in the IRS publications to help me calculate this transaction concerning the business portion of his COD. Any help or suggestions would be greatly appreciated.

Thank you,
Val

"Sale of Home" You exclude the home (if excludable) on $250,000 of profit if single on everything except the depreciation taken. That is taxed.
If the "sale" is less than the depreciation pay tax on the lesser amount.

Then you deal with the cancellation of debt. If it is taxable it goes on line 21.

This is probably not what you needed, but don't shoot me NRA.

[NRA Girl]

Thank you for your help. Not to worry - I only shoot orange clay targets. : )

Val

[Koss]

Nra

I thought you were a nonresident alien...



BMK

[NRA Girl]

Cute

Very cute, Burton. I get the joke AND I'm blonde!
"Sale of Home" You exclude the home (if excludable) on $250,000 of profit if single on everything except the depreciation taken. That is taxed.
If the "sale" is less than the depreciation pay tax on the lesser amount.

Then you deal with the cancellation of debt. If it is taxable it goes on line 21.

The "sale" was less - here are the figures:
Basis of Home office portion (01-01-2010): 57,657.00
Placed in service on January 1st, 2010
I calculated the FMV of the office at the date of foreclosure, which is:
38,054.00
Depreciation taken: $1,419.00
There is a loss . . . so instead of tax on depreciation, my client would 'benefit' from a loss on the sale, right?

Thank you!

[taxmom34]

my thinking is that since it is the sale of a personal residence, the depreciation taken is used to reduce the basis (that's how it is taxed as ordinary income)

[NRA Girl]

Hmmm, then by just reducing the basis - that makes sense. Thank you for your help!

[David1980]

The amount of debt cancelled was only $1,628.00 more than the FMV of his home.

So say he had a home worth $100,000, the debt cancelled would be $101,628, and the debt owed prior the cancellation $201,628? Or did the taxpayer keep the home?

[NRA Girl]

He didn't keep the home.