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RD
RD, Certified Public Accountant (CPA)
Category: Tax
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Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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Due to a short-sale of my primary residence, I ended up with

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Due to a short-sale of my primary residence, I ended up with a 1099 C Cancellation of Debt for almost $300,000.00. It is my understanding that as the primary home (I have two homes), I am exempt from the taxes that would result from the $300,000.00 cancellation of debt. Is this correct? And if so, is there an appropriate form or reports that need to be submitted at tax time to identify this as the primary home. Also, does a Form 982 have to be filled out?
Submitted: 4 years ago.
Category: Tax
Expert:  RD replied 4 years ago.
Yes, that is correct. You do not owe any tax on the cancellation of debt income.

You need to file Form 982 and report the amount of debt forgiven on this form and this form must be attached to your tax return.

Since you are reporting the exclusion of forgiveness of qualified principal residence indebtedness as the result of foreclosure on your principal residence, you only need to complete lines 1e and 2.

Let me know if you have any question.

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.


 

Customer: replied 4 years ago.
I need to be clear. You said you do NOT need to submit any supportive documentation establishing your primary residence? Is it correct to assume then, that you only need to provide supportive documentation if you are audited? If that happens, what kind of documentation is needed? Would pg&e bills, mortgage payments, homeowners association bills, and property tax documents suffice?

Thanks
Expert:  RD replied 4 years ago.
Yes, that is correct. Supporting documents would include utility bills, mtg payments, kids school records, HOA, your license, your mailing address, property tax documents, vehicle registration documents etc...
RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience: CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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