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    Another Cancellation of Debt

    I have a t/p that negotiated a cancellation of debt on Home Equity LOC recorded on his primary residence - - original loan was approx $ 145,000 - cancellation is $ 130,500

    Of the $ 145,000 on the Heloc - client spent approximately $ 50K in home Improvements, 30,000 on a 2nd Home (Trailer), and then 65,000 on Investment between $ in a bank account and down payment on Rental Prop.

    Question

    On the cancellation of debt for 2013, can I use the $50K on home improvements on form 982 and reduce the Primary Home Residence,

    then he pays tax on the remaining $ 80,500 cancellation?

    Thanks for thoughts

    Sandy

    #2
    I would calculate the percentage of the principal residence portion of the original debt and apply that percentage to the cancelled debt as qualified principal residence debt.

    Comment


      #3
      Thanks DonB

      Sandy

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