1099C was received for Residential Rental Real Estate for loan modification in 2013.. COD amount $135,693(Box 2) $6247, interest if included in box 2(Box 3). The TP is personally liable for repayment of the debt. FMV 539,470 Bal of loan after modification is $512,000. Would the $135,693 qualify for the Section 108? Would I reduce the $135,693 the $6247 interest? Thanks for your help.
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I don't know if this helps or not. Personally I have not run into these situations.
Price Reduced After Purchase
If debt you owe the seller for the purchase of property is reduced by the seller at a time when you are not insolvent and the reduction does not occur in a title 11 bankruptcy case, the reduction does not result in cancellation of debt income. However, you must reduce your basis in the property by the amount of the reduction of your debt to the seller. The rules that apply to bankruptcy and insolvency are explained in Exclusions , later.
Home Affordable Modification Program
Pay-for-Performance Success Payments and PRA investor incentive payments that reduce the principal balance of your home mortgage under the Home Affordable Modification Program (HAMP) are generally not taxable.
However, reductions of the principal balance of your home mortgage under HAMP's Principal Reduction Alternative may be taxable as cancellation of debt income. You may be able to recognize this income over a 3-year period. For more information, see https://www.irs.gov/uac/Principal-Re...cation-Program and Revenue Procedure 2013-16, available at www.irs.gov/irb/2013-07_IRB/ar09.html.
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