Form 982 Repossession - Divorced-Both Names

[zeros]

Client called and stated their house was repossessed (personal residence) and also they are divorced. They have received the form from the lender stating some figures on it (I have not seen it). Is the law on forgiveness of debt on personal residence still in effect? Also, the form is in both names. Do both have to file the 982 on their personal tax return seeing they will be filing separately?

[TAX4US]

Wasn't this one of the extenders that got passed? Will check this as I have one coming in. Anyone know for sure?

[Lion]

I think it got extended.

But, won't that help only the one still living there? The other ex may need to try for insolvency.

[mactoolsix]

Yes it was extended.

The rule:
Section 2, part 5:
(5) PRINCIPAL RESIDENCE- For purposes of this subsection, the term `principal residence’ has the same meaning as when used in section 121.’.

Section 121 of the IRS code http://www.law.cornell.edu/uscode/26...1----000-.html deals with capital gains tax exclusion on principal residence if a person lives in the home for the past 2 (aggregated) of 5 years.

As clearly outlined by the Mortgage Forgiveness Debt Relief Act, the IRS defines principal residence according to Section 121 of the IRS code, which states that it had to have been the person's principal residence for 2 of the past 5 years before the date of the sale (or foreclosure with regards to the Mortgage Debt Relief).

So, maybe if the two were together within the the last five years . . . .

Also, MFS has a $1Mil limitation instead of $2Mil

Mike

[Gary2]

As clearly outlined by the Mortgage Forgiveness Debt Relief Act, the IRS defines principal residence according to Section 121 of the IRS code, which states that it had to have been the person's principal residence for 2 of the past 5 years before the date of the sale (or foreclosure with regards to the Mortgage Debt Relief).

I disagree.

Section 121 doesn't define principal residence as having been used for 2 of the past 5 years. In fact, it doesn't define principal residence at all, although the regulations do.

Section 108(h)(5) says principal residence has the same meaning as in section 121. It doesn't say it has the same meaning as a residence that qualifies for the exclusion defined by section 121.

I interpret this as saying that for the purposes of 108(h)(5), principal residence is defined by the regs at 1.121-1(b), while the use and ownership requirements of 121 don't come into play.

[mactoolsix]

I disagree.

Section 121 doesn't define principal residence as having been used for 2 of the past 5 years. In fact, it doesn't define principal residence at all, although the regulations do.

Section 108(h)(5) says principal residence has the same meaning as in section 121. It doesn't say it has the same meaning as a residence that qualifies for the exclusion defined by section 121.

I interpret this as saying that for the purposes of 108(h)(5), principal residence is defined by the regs at 1.121-1(b), while the use and ownership requirements of 121 don't come into play.

Since I cannot find any reference as to "time" I must stand corrected by Gary. The instructions to Form 982 give this definition:

Principal residence. Your principal residence is your main
home, which is the home where you ordinarily live most of the
time. You can have only one main home at any one time.

So, where do you draw the line for form 982? - Did you have to be living in the home on the day of foreclosure? within the last month?

Thanks Gary,

[TAX4US]

Just what are we saying?. Case in point tp lived in home 7 years Moved out 2 years ago House was sold for less than amount owed(original loan). TP got 1099c for amount of debt relieved. Can form 982 be used in this case?

[Gary2]

Just what are we saying?. Case in point tp lived in home 7 years Moved out 2 years ago House was sold for less than amount owed(original loan). TP got 1099c for amount of debt relieved. Can form 982 be used in this case?

I assume you're really asking whether the Mortgage Forgiveness Debt Relief Act can be applied, since there might be insolvency or other reasons that would justify Form 982.

In my opinion, probably not unless their reason for moving out was driven by foreclosure proceedings. This is an unsettled law, with far more discussion than conclusion. I suggest looking at http://www.taxprotalk.com/forums/vie...php?f=8&t=1152 for starters.