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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.
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.
Thank you for reply. Do I have fill up special form for state of california
Beside, I can not print your reply can you e mail me so I can print and keep for my records
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.