Cancellation of Debt - Spidell

Cancellation of Debt

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Message Board Cancellation of Debt

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    • #247738
      Rhonda Worsham
      Participant

      I have a client that lost her primary residence due to the death of her husband and has a cancellation of debt and is insolvent. Is there anyway of not claiming the cancellation of debt?

       

    • #248123
      Diane White
      Participant

      Foreclosures and repossessions are treated as sales. She may be able to claim the Qualified Principal Residence Indebtedness exclusion. You may look at the Insolvency Worksheet in IRS Pub 4681 if the residence exclusion does not apply to see if she qualifies for that exclusion.

    • #248220
      Rhonda Worsham
      Participant

      Thank you Diane. She does qualify for that exclusion but California conforms only to the insolvency exclusion not the forgiveness on residence. So would you know how I would claim the insolvency?

    • #248238
      Diane White
      Participant

      You’re welcome. There is a good Insolvency Worksheet in the IRS Publication 4681.  You can use it or make one of your own similar to attach to the CA returns. In the past I have prepared an Excel spreadsheet outlining all of the pertinent information including as much information is possible about the transaction.

    • #248239
      William Dewberry
      Participant

      Attach irs form 982 to ca return

    • #248280
      Rhonda Worsham
      Participant

      Thank you Diane and William. I appreciate your help very much, Can I ask you another question. If she got an interest statement that was not included in her cancellation of debt I can include these amounts on a schedule A correct?

       

    • #248353
      Rhonda Worsham
      Participant

      any suggestions on how too attach the 982 IRS form too California and remove the taxable amount?

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