1. All audio is streamed through your computer speakers. There were several attendance verification questions presented during the LIVE webinar to qualify for CPE of the LIVE event only. For the archived/recorded version of this webinar, the link at the end of this presentation will be to final exam on the topics and learning objectives covered during this webinar plus there are also 3 online review questions to answer per hour. Financially Distressed Taxpayers 1

2. Financially Distressed Taxpayers Canceled Debts, Foreclosures, Repossessions, and Abandonments 2

3. Learning Objectives Upon completion of this webinar you will be able to: Recognize what happens when a financially distressed taxpayer can't pay the mortgage on their principal residence, vacation home, or investment property. Identify the tax consequences when a taxpayer gets foreclosed or abandons a real estate property. Identify the tax consequences of cancellation of debt for automobiles, credit cards, student loans, or real estate. Handle cancellation of debt income, and in which situations you can use the available exclusions to forego income from cancellation of debt. Identify who can be affected by foreclosures & repossessions. 3

4. Who Can Be Affected?  Anyone who has debt and cannot pay in the current economic environment  Affected taxpayers include students  Homeowners  Investors  Small and large business, and others 4

5. Who Can Be Affected?  4.2 million homeowner’s foreclosed since 2007  Foreclosures expected to rise to 6 million by 2014  Banks are not lending and credit is hard to get! 5

6. Who Can Be Affected?  Foreclosed homeowner’s can qualify for a home loan through a government program (FHA)  Federal Housing Agency (FHA) loans in 2011 were 30% compared to 4.5% in 2005  FHA loans require only 3.5% down payment 6

7. Discharge of Indebtedness  If you owe a debt which is canceled or forgiven, you may incur a tax liability  Exceptions and exclusions may apply to canceled debt  You may have to reduce tax attributes for any debt excluded from gross income 7

8. Foreclosure or Repossession  When foreclosed or repossessed property is sold, you are treated as having sold the property  You may have to recognize taxable gain  Every taxpayer is affected differently – review the facts and circumstances for each taxpayer 8

9. Foreclosure or Repossession  Recognizing gain on “canceled debt” depends on whether you are,  Personally liable for the debt, and if  The outstanding loan balance is more than the Fair Market Value (FMV) of the property 9

10. Abandonment  Property is abandoned when you voluntarily and permanently give up possession, and  You intend to end ownership without passing it on to anyone else (You do not sell property) 10

11. Nonbusiness Credit Card Debt Cancellation  You will receive a 1099-C if canceled debt is more than $600  Canceled debt may become taxable income  Taxpayer may qualify to exclude debt from income if cancellation occurred in a Title 11 Bankruptcy 11

12. Personal Vehicle Repossession  If your vehicle gets repossessed you should determine if you have  A gain, or  Nondeductible loss on the disposition 12

13. Main Home Foreclosure or Abandonment  Main home is considered “Principal Residence”  Need to calculate gain or loss on foreclosure  May qualify for exclusion under “Qualified Principal Residence Indebtedness” rules  $2 million exclusion for qualifying taxpayers MFJ; $1 million MFS (to end on 12/31/13) 13

14. Main Home Loan Modification  Lender agrees to a mortgage loan modification known as “Workout”, which includes principal balance reduction of loan  Taxpayer may qualify for Qualified Principal Residence Indebtedness exclusion 14

15. Canceled Debts  A debt includes any indebtedness:  Which you are personally liable for, or  Subject to which you hold property  Personally liable debt is recourse debt  All other debt is nonrecourse debt 15

16. Nonrecourse Debt  You do not have ordinary income from cancellation of nonrecourse debt, unless  You retain the collateral and either  The lender offers a discount for the early payment of the debt, or  The lender agrees to a loan modification that results in the reduction of the principal balance of the debt 16

17. Nonrecourse Debt  Must realize the entire amount of unpaid debt upon the disposition of the property securing a nonrecourse debt  May realize a gain or loss if outstanding debt before disposition is more or less than the adjusted basis in the property 17

18. Reporting Taxable Canceled Debt  Report taxable canceled debt as ordinary income on:  Form 1040 – Nonbusiness debt  Schedule C – Debt is nonfarm sole proprietorship  Schedule E – Debt is nonfarm rental of real property  Form 4835 – Debt related to farm rental activity  Schedule F – Debt that is farm debt and you are a farmer 18

19. Who Is An Applicable Entity?  A federal government agency  A financial institution  A credit union  Any organization in a significant trade or business of lending money 19

20. Cancellation of Debt  If an applicable entity cancels or forgives debt of $600 or more, a 1099-C will be issued.  Canceled debt is taxed as ordinary income even if you do not receive a 1099-C unless  An exception or exclusion applies 20

21. Discounts and Loan Modifications  If lender offers to reduce the principal loan balance if loan is paid off early, or  Agrees to a loan modification “workout” which includes a reduction in principal loan balance,  The amount of discount or reduction is cancelled debt whether or not you are personally liable  If your debt is nonrecourse and you don’t retain the collateral, you do not have cancellation of debt 21

22. Foreclosure and Repossession Debt  Lender may forgive all or part of the debt in excess of the FMV of property  Cancellation of excess debt (Debt – FMV) may result in Ordinary Income  Gain or loss on disposition of property is calculated as (FMV- Adjusted Basis)  Character of gain or loss is determined by character of property 22

23. Abandonments  If abandoned property is secured by recourse debt, you will realize ordinary income on cancelled debt  You may realize a gain or loss on abandonment of property in addition to debt cancellation  Abandoned property secured by nonrecourse debt does not create cancellation of debt income 23

24. Jointly and Severally Liable Debt  If two individuals are jointly and severally liable for cancelled debt, both may get a 1099-C showing entire amount of canceled debt  Not both individuals report the entire amount as income 24

25. Jointly and Severally Liable Debt  Amount reportable as income depends on facts and circumstances, including:  State law  The amount of debt proceeds each person received  How much of any interest reduction from debt was claimed by each person  How much of basis of any co-owned property bought with debt proceeds was allocated to each co-owner  Whether canceled debt qualifies for any exceptions or exclusions 25

26. Gifts  Typically you do not have income from debt cancellation, if  Cancellation or forgiveness of debt is a gift 26

27. Student Loans  Certain student loans provide that debt will be canceled, if  Student attends a Qualified educational institution, and  Works for a certain time period in certain professions for any of a broad class of employers 27

28. Student Loans  If a student loan is canceled and meets the provisions, canceled debt is not included in gross income  To qualify for this treatment, loan must be made by one of the following 28

29. Student Loans  Federal government, state or local government  A tax-exempt public benefit corporation which has assumed control of a state, county, or municipal hospital, and whose employees are considered public employees under state law, or  An educational institution (part of a program to encourage students to serve in occupations or areas with unmet needs) 29

30. Student Loans  Cancellation of student loans made by an educational institution for performing services for that institution or another organization,  Must be included in gross income  Loan must be part of a qualifying program 30

31. Education Loan Repayment Assistance  Education loan repayments you receive from National Health Services Corps Loan Repayment Program, or a State Education Loan Repayment Program that is  Eligible for funds under Public Heath Service Act,  Are not taxable if you provide primary health services in health professional shortage areas 31

32. Price Reduced After Purchase  If seller reduces amount you owe when you are not insolvent, and  Reduction does not occur in a Title 11 bankruptcy case,  The reduction does not result in cancellation of debt income,  You must reduce basis in property by amount of debt reduced by seller. 32

33. Home Affordable Modification Program  Any pay-for-performance success payments that reduce the principal balance of your home mortgage are not taxable  Payments must be made under the Home Affordable Modification Program 33

34. Exclusions for Canceled Debt  Canceled debt may be excluded from taxable income  If you exclude canceled debt under one of the provisions, you must reduce your tax attributes which can include  Certain credits, losses, and basis of assets 34

35. Bankruptcy  Debt canceled in a Title 11 bankruptcy is not included in your income  Title 11 bankruptcy is a case under Title 11 of the U.S. Code (including all Chapters in Title 11 such as Chapter 7, 11, and 13)  Debtor must be under court jurisdiction and cancellation of debt must be granted by court 35

36. Insolvency  Canceled debt is not included in income to the extent you were insolvent immediately before the cancellation  All of your Liabilities must be more than the FMV of all your Assets  Assets include those that are collateral assets, and those which are beyond reach of the creditors (retirement accounts) 36

37. Insolvency Exclusion  Which liabilities are included in insolvency calculation?  Entire amount of recourse debts (personally liable debts)  Amount of nonrecourse debt that is not in excess of the FMV of property that is security for the debt, and  The amount of nonrecourse debt in excess of the FMV of the property that is forgiven debt 37

38. How to Report Insolvency Exclusion?  To exclude canceled debt under the insolvency exclusion, attach Form 982 to tax return and  Check Box on line 1B  Must reduce tax attributes in Part II of Form 982  Use Insolvency worksheet to calculate insolvency amount 38

39. Example 1 Insolvency More Than Cancelled Debt  In 2011 Greg was released from personal credit card debt of $5,000  Greg received 1099-C reflecting $5,000 in Box 2  Total liabilities $15,000 & FMV of assets $7,000  Insolvent by $8,000 ($15,000 liabilities - $7,000 FMV)  Insolvency is greater than debt - $5,000 debt excluded 39

40. Example 2 Insolvency Less Than Canceled Debt  Same facts as Example 1 except for  Greg’s liabilities before the cancellation were $10,000 & FMV of assets were $7,000  Greg is insolvent to extent of $3,000 ($10,000 liabilities - $7,000 FMV of assets)  Can exclude only $3,000 of the $5,000 debt  Include $2,000 of canceled debt as income 40

41. Qualified Farm Indebtedness  Exclude canceled farm debt if all three apply: 1)Debt was incurred directly in connection with a trade or business of farming 2)50% of more of total gross receipts in 2009, 2010, and 2011 were from farming business 3)The cancellation was made by a Qualified Person 41

42. Who Is A Qualified Person?  An individual, organization, partnership, association, or corporation actively & regularly engaged in the business of lending money  Also includes any federal, state, or local government agency. U.S. Dept of Agriculture is a qualified person  Qualified person can’t be related to you, can’t be the person you acquired the property from or anyone related to this person 42

43. Qualified Farm Indebtedness  If Qualified Farm Debt is canceled in a Title 11 bankruptcy, you must apply the bankruptcy exclusion  Do not apply the exclusion for Qualified Farm Debt  If Insolvent before debt cancellation apply Insolvency exclusion not Qualified Farm Debt exclusion 43

44. Qualified Farm Debt Exclusion  Amount of Qualified Farm Debt that can be excluded is limited. It cannot be more than the sum of:  Your adjusted tax attributes, and Total adjusted basis of “Qualified Property” held at the beginning of 2013 (any property held or used in your trade or business or for production of income)  Any canceled qualified farm debt above this limit must be included as income 44

45. 45 Review Questions for Self-Study CPE Now’s the time to answer the review questions. Follow this link: http://www.proprofs.com/quiz-school/story.php?title=NTc2ODYy Please leave quiz window open and wait to submit until prompted to complete questions 4 through 6. Once completed, press Submit and close quiz window.

46. Adjusted Tax Attributes  Adjusted tax attributes is the sum of the following 4 items: 1)Any net operating loss for 2012 and any NOL carryover to 2012 2)Any net capital loss for 2012 and any capital loss carryover to 2012 3)Any passive activity loss carryover from 2012 46

47. Adjusted Tax Attributes 4)Three times the sum of any: A.General business credit carryover to or from 2012 B.Minimum tax credit available as of the beginning of 2013 C.Foreign tax credit carryover to or from 2012 D.Passive activity credit carryover from 2012 47

48. How To Report Qualified Farm Indebtedness Exclusion  Check the box on line 1c of Form 982  On line 2 of Form 982 include amount of qualified farm debt canceled, but not more than exclusion limit  Must also reduce the tax attributes in Part II of Form 982 48

49. Example 3 Chuck’s Farming Debt  Chuck released from $10,000 of debt incurred directly in connection with his farming business  Received 1099-C showing $10,000 in Box 2  For 2009, 2010, 2011 at least 50% of total gross receipts were from farming trade or business  Adjusted tax attributes are $5,000 & Adjusted basis in qualified property is $3,000 49

50. Example 3 (Cont) Chuck’s Farming Debt  Does Chuck qualify to exclude canceled debt under the Qualified Farm Indebtedness exclusion?  If so, how much can he exclude?  What do you recommend to Chuck as his tax professional? 50

51. Example 3 (Cont) Chuck’s Farming Debt  Chuck can exclude $8,000 of the $10,000 of canceled farm debt  $5,000 adjusted tax attributes + $3,000 total adjusted basis in Qualified Property at the beginning of 2012  Chuck must include $2,000 of canceled debt as income 51

52. Qualified Real Property Business Indebtedness  Can exclude canceled qualified real property business debt from income if the following 4 conditions are met: 1)Debt incurred or assumed in connection with real property used in trade or business 2)Debt is secured by the real property 52

53. Qualified Real Property Business Indebtedness 3)Debt incurred or assumed  Before 1993, or  After 1992 if debt is either Qualified Acquisition Indebtedness, or debt incurred to refinance qualified real property business debt incurred or assumed before 1993 (cannot exceed original acquisition debt amount) 4)You elect to apply these rules to the debt 53

54. What Is Qualified Acquisition Indebtedness?  Debt incurred or assumed to acquire, construct, reconstruct, or substantially improve real property that is used in a trade or business and secures the debt, or  Debt resulting from the refinancing of qualified acquisition indebtedness, to extent amount of debt doesn’t exceed amount of debt refinanced 54

55. Qualified Real Property Business Indebtedness  If Qualified real property business debt is canceled in Title 11 bankruptcy case you must apply bankruptcy exclusion  If insolvent immediately before cancellation of business debt, you must apply insolvency exclusion before applying exclusion for Qualified real property business debt 55

56. Electing The Qualified Real Property Business Debt Exclusion  An Election must be made to exclude canceled Qualified real property business debt from income  Election must be made on a timely filed tax return (including extensions). May only be revoked with IRS consent  Make Election using Form 982. Attach to tax return and check Box on line 1d.  Include canceled debt amount on line 2 of Form 982. Reduce tax attributes in Part II of Form 982 56

57. Electing The Qualified Real Property Business Debt Exclusion  If you forgot to make election you are still eligible  File an amended return within 6 months of the due date of the return (excluding extensions)  Enter “Filed Pursuant to Section 301.9100-2” on the amended return 57

58. Qualified Principal Residence Indebtedness  You can exclude canceled debt if it is Qualified Principal Residence Indebtedness  What is Qualified Principal Residence Indebtedness?  Does everyone qualify for this exclusion? 58

59. Qualified Principal Residence Indebtedness  Qualified Principal Residence Indebtedness is any mortgage taken out to buy, build, or substantially improve your Main home  Also includes any debt secured by your main home that was used to refinance a mortgage taken out to buy, build, or substantially improve your main home  Amount cannot exceed old mortgage principal balance just before refinancing (NO Cash Out Loans) 59

60. Example 4 Becky’s Qualified Principal Residence Debt  In 2005 Becky bought a Main home - $315,000  Took out new mortgage loan for $300,000  Took out 2 nd mortgage loan for $50,000 at a later time to add a garage to her home  In 2012 her mortgage loan balance was $325,000 for 1 st & 2 nd mortgage loans 60

61. Example 4 Becky’s Qualified Principal Residence Debt  Becky refinanced the two mortgage loans of $325,000 into one loan for $400,000  FMV of her home at refinance was $430,000  She used additional $75,000 from refinance loan to pay off credit card debt and college tuition for her daughter 61

62. Example 4 Becky’s Qualified Principal Residence Debt  How much is Becky’s Qualified Principal Residence Indebtedness after the refinancing?  What questions or documentation would you ask for when your new client Becky comes to your office for her 2012 tax return preparation? 62

63. What Kind of Property Qualifies for a Main Home?  A main home is the home where you ordinarily live most of the time  You can only have one main home at any one time 63

64. What Kind of Property Qualifies for a Main Home?  John Poor and Rhonda Poor have 2 homes within 5 miles of each other.  The second home was purchased as a foreclosure and it was such a great deal the Poor’s couldn’t pass it up!  Every 2 weeks the Poor’s get in an argument and Mr. Poor lives in the 2 nd home for 7 days  Do both homes qualify as a main home? 64

65. Principal Residence Exclusion Limit  Maximum amount of debt you can treat as Qualified Principal Residence Indebtedness is $2 million or $1 million if married filing separate  Expired on 12/31/12 but extended to 12/31/13 under the Fiscal Cliff Bill passed early January 2013  Cannot exclude canceled debt if cancellation was for services performed for the lender, or for any other factor not directly related to a decline in value of your home or due to your financial condition 65

66. Principal Residence Exclusion Ordering Rule  If only part of a loan is Qualified Principal Residence Indebtedness, the exclusion applies only to extent the amount canceled is more than the amount of the loan that is NOT Qualified Principal Residence Indebtedness  The remaining part of the loan may qualify for another exclusion 66

67. Example 5 Ken’s Principal Qualified Residence Debt  Ken incurred recourse debt of $800,000 when he purchased his main home for $880,000  Ken refinanced for $850,000 when FMV of home was $1 million  At time of refinancing the principal loan balance was $740,000  Ken used $110,000 from refinance to pay off credit cards and buy a New Porsche 67

68. Example 5 Ken’s Principal Qualified Residence Debt  2 years after refinancing Ken lost his job  He did a short sale of the property for $735,000  FMV of home was between $700,000 - $750,000  Lender canceled remaining $115,000 of debt  How much of the $115,000 canceled debt can Ken exclude as Qualified Principal Residence Indebtedness? 68

69. Example 5 Ken’s Principal Qualified Residence Debt  Ken can only exclude $5,000 of the canceled debt  Ken must include $110,000 of canceled debt as income (unless another exclusion applies)  $115,000 canceled debt - $110,000 debt that wasn’t Qualified Principal Residence Indebtedness 69

70. How To Report Qualified Principal Residence Indebtedness Exclusion  Attach Form 982 to your tax return and check Box 1e  On line 2 of Form 982 include the amount of canceled Qualified Principal Residence Indebtedness, but not more than exclusion limit  If you continue to own the home you must reduce your basis in the home 70

71. Reduction of Tax Attributes Qualified Principal Residence Indebtedness  Reduce the basis of your home by amount of canceled Qualified Principal Residence Indebtedness excluded from income, if you  Continue to own the home after the cancellation of debt  Enter amount of basis reduction on Form 982 line 10b 71

72. Bankruptcy and Insolvency No Tax Attributes Other Than Basis of Personal- Use Property  If you exclude canceled debt other than Qualified Principal Residence Indebtedness and you have no tax attributes besides the adjusted basis of personal-use property, then  You must reduce the basis of the personal-use property you held at the beginning of 2013 (in proration to adjusted basis)  Personal-use property is any property not used in a trade or business nor held for investment purposes 72

73. Bankruptcy and Insolvency All Other Tax Attributes  If canceled debt is excluded using bankruptcy or insolvency exclusions, you must reduce the following tax attributes by amount of excluded debt: 1)“Net Operating Loss” – Reduce any 2012 NOL first, then any NOL carryover to 2011. (Reduce $1 for ever $1 of excluded debt) 2)“General Business Credit” – Reduce credit carryover to or from 2012. (Reduce the carryover by 33 1/3 cents for ever $1 of excluded debt) 73

74. Bankruptcy and Insolvency All Other Tax Attributes 3)“Minimum Tax Credit” – Reduce minimum tax credit available at beginning of 2013. (Reduce credit by 33 1/3 cents for every $1 of excluded canceled debt) 4)“Capital Loss” – Reduce first any 2012 net capital loss, then capital loss carryover to 2012 (Reduce capital loss or carryover by $1 for every $1 of excluded canceled debt) 74

75. Bankruptcy and Insolvency All Other Tax Attributes 5)“Basis” – Reduce basis of property held at beginning of 2013 (in proportion to adjusted basis) in the following order: A.Real Property used in trade or business or held for investment that secured canceled debt B. Personal Property used in trade or business or held for investment that secured canceled debt C. Other Property used in trade or business or held for investment 75

76. Bankruptcy and Insolvency All Other Tax Attributes D.Inventory, accounts receivable, notes receivable, or real property held primarily for sale to customers E. Personal-use property (not used in trade or business and not held for investment) 6)“Passive Activity Loss and Credit Carryovers” Reduce passive activity loss and credit carryovers from 2012 (Reduce loss carryover by $1 for every $1 dollar of excluded debt, Reduce Credit Carryover by 33 1/3 cents for every dollar of excluded debt) 76

77. Bankruptcy and Insolvency All Other Tax Attributes 7)“Foreign Tax Credit” – Reduce credit carryover to or from 2012. (Reduce credit carryover by 33 1/3 cents for every $1 dollar of excluded debt)  An election can be made to reduce basis of depreciable property before reducing other tax attributes  If amount of canceled debt excluded is more than total basis of depreciable property, then reduce the other tax attributes with the excess debt remaining 77

78. Bankruptcy and Insolvency Recapture of Basis Reductions  If basis of property is reduced under these provisions, and you later sell or otherwise dispose of property at a gain  The part of the gain due to this basis reduction is taxable as ordinary income under depreciation recapture provisions  Treat any Non Section 1245 or Section 1250 property as Section 1245 property 78

79. Qualified Farm Indebtedness  If debt is excluded under both insolvency exclusion and Qualified Farm Indebtedness exclusion, you  First reduce your tax attributes by the amount excluded under the insolvency exclusion  Next reduce your remaining tax attributes by amount of canceled debt qualifying for farm debt exclusion  Reduce tax attributes in same order explained under “Bankruptcy and Insolvency” rules 79

80. Qualified Farm Indebtedness  Reduce only the basis of Qualified Property (property used or held for use in a trade or business, or for production of income) in following order: 1)Depreciable qualified property 2)Land that is qualified property and is used or held for use in your farming business 3)Other qualified property 80

81. Qualified Real Property Business Indebtedness  If you elect to exclude canceled Qualified Real Property Business debt, you must  Reduce the basis of your depreciable real property by amount of canceled Qualified Real Property Business debt excluded from income  Enter amount of basis reduction on Form 982 line 4 81

82. Foreclosures and Repossessions  Foreclosures and Repossessions are treated as sales  You may realize a gain or loss from transaction even if you voluntarily return the property  If outstanding loan balance is more than FMV of property, and lender cancels all or part of loan balance, you  May realize ordinary income from cancellation of debt 82

83. Foreclosures and Repossessions Gain or Loss  Figure and report gain or loss in the same way as a regular sale  Gain = Amount Realized – Adjusted Basis  Loss = Adjusted Basis – Amount Realized 83

84. Foreclosures and Repossessions Amount Realized and Ordinary Income on Recourse Debt  If personally liable for debt, the amount realized on the foreclosure or repossession includes the Smaller of: A. Outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after transfer, or B. The FMV of the transferred property 84

85. Example 6 Lili’s Recourse Debt Foreclosure  Lili paid $200,000 for her home  Borrowed $185,000 from the bank  Lili is personally liable for the loan (recourse)  Upon foreclosure balance due was $180,000 & FMV of home was $170,000  Adjusted basis was $175,000 due to casualty loss  Bank forgave $2,000 of the $10,000 debt that was in excess of FMV ($180,000-$170,000) 85

86. Example 6 Lili’s Recourse Debt Foreclosure  Lili remains personally liable for $8,000 balance  How much ordinary income does Lili have from the cancellation of debt?  What is Lili’s Gain or Loss from foreclosure?  Can Lili exclude any of the canceled debt? 86

87. Example 6 Lili’s Recourse Debt Foreclosure  Lili has ordinary income of $2,000 from cancellation of debt  ($170,000 FMV - $172,000 outstanding debt before foreclosure less amount she remains personally liable for $8,000) ($180,000-$8,000)  Lili can exclude $2,000 of canceled debt under the Qualified Principal Residence Indebtedness  She has a $5,000 Nondeductible loss ($170,000 realized - $175,000 Adjusted Basis) 87

88. Amount Realized on a Nonrecourse Debt  The amount you realize a on nonrecourse debt includes  The full amount of the outstanding debt immediately before the transfer  This holds even if the FMV of property is less than the outstanding debt before the transfer 88

89. Abandonments  Abandonment occurs when you voluntarily and permanently give up possession and use of the property, but  You don’t pass it on to anyone else (No Sale)  A Voluntary conveyance of the property in lieu of foreclosure (Deed in Lieu of Foreclosure) is not an abandonment.  It is treated as an exchange of property to satisfy debt 89

90. Abandonments – Tax Consequences  Tax consequences of an abandonment of property depends on whether the loan is  Recourse (Personally liable), or  Nonrecourse (Not personally liable) 90

91. Abandonment of Property Securing Recourse Debt  If you abandon property that secures debt for which you are personally liable, you do not have gain or loss until the foreclosure is completed 91

92. Abandonment of Property Securing Nonrecourse Debt  If you abandon property that secures debt for which you are not personally liable (nonrecourse) debt, the abandonment is treated as a sale or exchange  Amount realized on the abandonment of property is the amount of the nonrecourse debt 92

93. Abandonment of Property Securing Nonrecourse Debt  If amount realized is more than the adjusted basis, you have a gain  If adjusted basis is more than amount realized, you have a loss  Loss from abandonment of business or investment property is a deductible loss  Character of the loss depends on character of the property; Cannot deduct loss for personal use property 93

94. Abandonment – Canceled Debt  If abandoned property is secured by debt that you are personally liable for, and debt is canceled  You will realize ordinary income equal to the canceled debt, and  You will realize gain or loss from abandonment 94

95. 95 Review Questions for Self-Study CPE Now’s the time to complete the review questions. Follow this link: http://www.proprofs.com/quiz-school/story.php?title=NTc2ODYy Please finish the remaining review questions and press Submit. Once submitted, please close the review questions window.

96. Thank you for participating in this webinar. Below is the link to the online survey and CPE quiz: http://webinars.nsacct.org/postevent.php?id=10804 http://webinars.nsacct.org/postevent.php?id=10804 Use your password for this webinar that is in your email confirmation. You must complete this survey and the quiz or final exam (for the recorded version) to qualify to receive CPE credit. National Society of Accountants 1010 North Fairfax Street Alexandria, VA 22314-1574 Phone: (800) 966-6679 members@nsacct.org