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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28082
Experience:  Taxes, Immigration, Labor Relations
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I HAD RENTAL PROPERTY IN FLORIDA WHICH I BROUGHT 185000 IN

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I HAD RENTAL PROPERTY IN FLORIDA
WHICH I BROUGHT 185000 IN MARCH 2005 THE PROPERTY WAS SHORT SALE IN THE CALENDAR YEAR 2012. I RECEIVED FORM 1099 C FOR 100,924
I WILL DECLARE MY SALE OF PROPERTY ON 4797 USING THE COST MINUS DEPRECIATION -SELLING COST - MINUS CANCELLATION OF DEBT AND SELLING PRICE WHICH IS REPORTED ON FORM 1099 S- (PROCEEDS FROM REAL ESTATE TRANSACTION)
mY QUESTION IS CANCELLATION OF DEBT IS TAXABLE OR NOT OR JUST MENTION ON FORM 832

LEV :

Hi and welcome to Just Answer!


Considering your situation - you do qualify to exclude the canceled debt as "qualified real property business indebtedness" - still you will need the tax attribute reduction - means the basis should be reduced by the amount of debt forgiven.


Use Form 982 - www.irs.gov/pub/irs-pdf/f982.pdf - specifically - for rental property - check the box 1(d) - Discharge of qualified real property business indebtedness


, and put the forgiven amount $100,924 on the line 2 and on line 4 and line 10a.
The line 10 is specifically to reduce the basis.

LEV :

The disposition of the property is reported on Form 4797 - http://www.irs.gov/pub/irs-pdf/f4797.pdf - is to report the disposition of business property - rental property in your situation. To calculate your gain or loss - you will use an adjusted basis reduced by the amount of debt forgiven.
So you might have a gain or a loss on the disposition.

Customer:

Thank you for reply. Do I have fill up special form for state of california

Customer:

Beside, I can not print your reply can you e mail me so I can print and keep for my records

LEV :

No special form - California follows federal rules this matter.
You may copy and paste the text into your local document.
You will be able to print as a regular web page when we close the chat - use same address - I will switch out from chat mode when we done.

LEV :

Please be aware - experts do not have access to your account and may not initiate e-mails.

Just in case you were not able to use the chat - I am switching to Q&A mode and porting the answer below.
Please feel free to communicate if you need any clarification or have other tax related issues.

No special form - California follows federal rules this matter.
You may copy and paste the text into your local document.
You will be able to print as a regular web page when we close the chat - use same address - I will switch out from chat mode when we done.
Please be aware - experts do not have access to your account and may not initiate e-mails.
Lev and other Tax Specialists are ready to help you