1099C Cancellation of 'Debt

[kay.integrity]

Situation: Tax payer received form 1099C for property he owned and his parents lived in. The property was originally purchased in 1985 by the Father and taxpayer for 120k, however due to two refinances the last being 10 years ago for 157k, the property transferred to the taxpayer solely without any exchange of funds. 3 years ago the parents moved out of this property and into the home of the taxpayer. During the last 9 years the parents have been dependents of the taxpayer due to declining health. The property was sold by the bank for 160k during 2014. The 1099C was in the amount of 40k.

Question: Can this property be treated as a primary residence on the 2014 tax return. Or any other suggestions to offset the 40k?

[Lion]

The taxpayer receiving the 1099-C never lived in the house? Then, not his primary residence. Is insolvency a possibility? Was the loan that was forgiven ever in the parents' name?

[ATSMAN]

More than likely the father signed a quit claim deed and the son now owns 100% of the house and the 1099-C problem!

Can't be the son's primary residence because OP stated the son never lived in that house, so it is a second home.