Cancellation of Qualified Real Property Business Debt

[LVS]

If the debt really was nonrecourse debt, then there wouldn't be any income to exclude. However, most of the nonrecourse states limit it to personal residence, so perhaps you meant it was recourse.

If there is CODI to be excluded, it's reported on the 982. Do some research, because I've seen disagreements as to whether rental property qualifies for the QRPBI exclusion. If you conclude it does qualify for QRPBI, make sure you account for the various acquisition debt limits.

The loss on the 4797 is deductible. I don't know why you would think otherwise.

The 2014 edition of the "The Tax Book 1040 Edition" on page 14-12, "Property Secured by Nonrecourse Debt".
The example for both recourse and nonrecourse debt cancellation realize a "nondeductible capital loss".

[Gary2]

Client received 1099-C for rental property foreclosure.
The debt was nonrecourse debt and was excluded on Form 982, "Reduction of Tax Attributes Due to Discharge of Indebtedness".
The basis of the assets foreclosed was reduced on Form 982, line 4. And the sale of business assets was reported on Form 4797, creating a capital loss.
Am I correct that this is a nondeductible loss due to the cancellation of debt? And what form/line should the exclusion of the loss be reported on?

If the debt really was nonrecourse debt, then there wouldn't be any income to exclude. However, most of the nonrecourse states limit it to personal residence, so perhaps you meant it was recourse.

If there is CODI to be excluded, it's reported on the 982. Do some research, because I've seen disagreements as to whether rental property qualifies for the QRPBI exclusion. If you conclude it does qualify for QRPBI, make sure you account for the various acquisition debt limits.

The loss on the 4797 is deductible. I don't know why you would think otherwise.

[LVS]

Client received 1099-C for rental property foreclosure.
The debt was nonrecourse debt and was excluded on Form 982, "Reduction of Tax Attributes Due to Discharge of Indebtedness".
The basis of the assets foreclosed was reduced on Form 982, line 4. And the sale of business assets was reported on Form 4797, creating a capital loss.
Am I correct that this is a nondeductible loss due to the cancellation of debt? And what form/line should the exclusion of the loss be reported on?