Eli Posted March 26, 2013 Report Share Posted March 26, 2013 Client received a 1099-C for a foreclosed home. The amount of the cancelled debt is $33217. I am using form 982 & checked off the box in Line 1E & put the amount of the debt in Line 2. Should this change the amount of tax owed? Without including the cancelled debt the taxpayers would receive a $2800+ refund. If I include the cancelled debt they owe $2700+ in additional tax. I have included the 982 & it still shows tax due of $2700+ Am I missing something somewhere? Thanks! Eli Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted March 26, 2013 Report Share Posted March 26, 2013 If the cancelled debt was for their primary residence and they have lived there 3 of the last 5 years, there is no tax consequence for the 1099-C. Do not enter the 1099-C on line 7. Quote Link to comment Share on other sites More sharing options...
Eli Posted March 26, 2013 Author Report Share Posted March 26, 2013 Thanks Jack, but do I just leave the amount off of the tax return completely? Or is the 982 supposed to show that the transaction is non-taxable & zero out the tax? Quote Link to comment Share on other sites More sharing options...
Eli Posted March 26, 2013 Author Report Share Posted March 26, 2013 Sorry, Jack ! I just saw the last part of your response. Thanks so much! Eli Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted March 26, 2013 Report Share Posted March 26, 2013 The information on the 982 will satisfy the IRS when they do document matching. Quote Link to comment Share on other sites More sharing options...
mcb39 Posted March 26, 2013 Report Share Posted March 26, 2013 That is if they notice it. I had a case once when the client received a CP-2000 because they did not report the 1099-C. The examiner never noticed the 982 at the bottom of the heap. It may be specifically looked for now as it is so much more common. Anyway, all ended well for my client. 1 Quote Link to comment Share on other sites More sharing options...
Lee B Posted March 26, 2013 Report Share Posted March 26, 2013 Actually, we need more information. If the home was refinanced and cash was taken out, then to that extent there could be taxable income. Read Pub 4681 Quote Link to comment Share on other sites More sharing options...
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