Most home lenders, banks and government agencies are required to notify you and the IRS if they cancel all or a part of your debt. This is done by the issuance of Form 1099-C or, at times, Form 1099-A. By law, these forms must show the amount of debt forgiven and the fair market value [...]
Kent Anderson, Oregon Bankruptcy Attorney
As you know from the previous “Tax Facts”, when mortgage debt is forgiven, it can be excluded from income if it is qualified principle residence debt, and you know that a qualified principal residence must be the main home of the taxpayer. What happens to mortgage debt that is cancelled on a second home, rental [...]
The IRS wants you to know, in Tax Fact 7, that you must use Form 982 in order to claim that forgiven mortgage debt should not be included in your income for tax purposes. IRS Form 982, entitled “Reduction of Tax Attributes Due to Discharge of Indebtedness” must be attached to your federal income tax [...]
In explaining tax on mortgage debt forgiveness, the IRS stresses, as tax fact number 6, that proceeds of refinance debt used for purposes, other than buying, building, or making a substantial improvement in the principle residence, do not qualify for exclusion from income if the debt is cancelled. This can be important. Many lenders require [...]
IRS tax fact number 5 tells us that refinanced debt proceeds used for the purpose of substantially improving your personal residence qualify for exclusion from income if the debt is later is cancelled. In other words, if you re-finance your principal residence home mortgage and use the excess funds (the portion not used to pay [...]
Mortgage debt forgiveness is considered to be income unless it is excluded. Principal residence debt has its own exclusion from income if it is cancelled or forgiven by the lender. To “qualify” it must be what is defined by the Internal Revenue Service as “qualified principal residence debt”. The debt must have been used to [...]
