IRS Publication 4681: Canceled Debts, Foreclosures, Repossessions, and Abandonments (For Individuals) For use in preparing 2008 Returns

IRS Publication 4681: Canceled Debts, Foreclosures, Repossessions, and Abandonments (For Individuals) For use in preparing 2008 Returns

For use in preparing 2008 Returns

Link: http://www.irs.gov/pub/irs-pdf/p4681.pdf

This publication explains the federal tax treatment of canceled debts, foreclosures, repossessions, and abandonments.

Generally, if you owe a debt to someone else and they cancel or forgive that debt, you are treated for income tax purposes as having income and may have to pay tax on this income. This publication refers to this as “canceled debt” whether it is canceled or forgiven. However, under certain circumstances, you may not have to include canceled debt from income you may also be required to reduce “tax attributes.” Reduction of tax attributes is discussed in more detail later in this publication.

If you have property that is security for a debt and that property is taken by the lender in full or partial satisfaction of your debt, you will be treated as having sold that property and may have gain or loss as a result. For this purpose, it does not matter whether the lender took the property through foreclosure, repossession, a voluntary conveyance by you to the lender, or your abandonment of the property. If the lender cancels debt in excess of the fair market value (FMV) of the property taken by the lender, the excess of the canceled debt over the FMV of the property may have to be treated by you as ordinary income from the cancellation of debt in addition to any taxable gain that you may have had from being treated as having sold the property.

If you are treated as having sold the property, any gain you have will generally have to be reported on your income tax return. IF you have a loss, you may be entitled to deduct the loss if the property that was returned to the lender is business or investment property, but not if it is personal use property, such as your residence.

This publication discusses the general rule requiring canceled debt to be included in income, exceptions to the general rule, exclusions from the general rule, and the ordering rules for reduction of tax attributes by reason of the exclusion of canceled debt from income. This publication also discusses the tax treatment resulting from foreclosures, repossessions, and abandonments and provides detailed examples with filled-in forms.

 

We hope you found this article about “IRS Publication 4681: Canceled Debts, Foreclosures, Repossessions, and Abandonments (For Individuals) For use in preparing 2008 Returns” helpful.  If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page  or our website at www.GROCO.com.  Unfortunately, we no longer give advice to other tax professionals gratis.

To receive our free newsletter, contact us here.

Subscribe our YouTube Channel for more updates.

Alan Olsen, CPA

Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com.  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.

 

Alan L. Olsen, CPA, Wikipedia Bio

 

 

GROCO.com is a proud sponsor of The American Dreams Show.

 

American-Dreams-Show-Accounting-firm-in-ca-cpa-tax-advisors-groco-alan-olsen

The American Dreams show was the brainchild of Alan Olsen, CPA, MBA. It was originally created to fill a specific need; often inexperienced entrepreneurs lacked basic information about raising capital and how to successfully start a business.

Alan sincerely wanted to respond to the many requests from aspiring entrepreneurs asking for the information and introductions they needed. But he had to find a way to help in which his venture capital clients and friends would not mind.

The American Dreams show became the solution, first as a radio show and now with YouTube videos as well. Always respectful of interview guest’s time, he’s able to give access to individuals information and inspiration previously inaccessible to the first-time entrepreneurs who need it most.

They can listen to venture capitalists and successful business people explain first-hand, how they got to where they are, how to start a company, how to overcome challenges, how they see the future evolving, opportunities, work-life balance and so much more..

American Dreams discusses many topics from some of the world’s most successful individuals about their secrets to life’s success. Topics from guest have included:

Creating purpose in life / Building a foundation for their life / Solving problems / Finding fulfillment through philanthropy and service / Becoming self-reliant / Enhancing effective leadership / Balancing family and work…

Untitled_Artwork copy 4

MyPaths.com (Also sponsored by GROCO) provides free access to content and world-class entrepreneurs, influencers and thought leaders’ personal success stories. To help you find your path in life to true, sustainable success & happiness.  It’s mission statement:

In an increasingly complex and difficult world, we hope to help you find your personal path in life and build a strong foundation by learning how others found success and happiness. True and sustainable success and happiness are different for each one of us but possible, often despite significant challenges.

Our mission at MyPaths.com is to provide resources and firsthand accounts of how others found their paths in life, so you can do the same.

Posted in
Nick Nanton

Nick Nanton – Emmy Nominated Filmmaker

Transcript, Nick Nanton –  Emmy Nominated Filmmaker: Nick Nanton: My parents essentially said, Hey, Nick, you can have anything you want in life as long as you can earn it, because we’re just trying to hold on here. So I learned pretty young that if you could provide value to other people they would give…

Gareb Shamus

Gareb Shamus – Bringing NFTs to Super Heroes

Gareb Shamus Biography Gareb Shamus is a serial entrepreneur, visionary, and cultural catalyst who has influenced over a billion people through his businesses, communities, and relationships in the Superhero and character franchise worlds.   As the founder and publisher of Wizard magazine, Shamus created the comic book industry’s most influential voice and grew Comic Con…

Heidi Kuhn - CEO of Roots of Peace

Heidi Kuhn–Founder of Roots of Peace

Transcript, Heidi Kuhn–Founder of Roots of Peace Alan Welcome to today’s show. Can you share a little about your background with us?   Introduction of Heidi Kuhn, see bio below   Heidi When one looks back on the tapestry of our life, you know, it is those seeds that we have in common rather than…

Three Reasons the Fed is Lying About Inflation

Why would the US federal government purposely underreport or flat out lie about the current rate of US inflation?  Below are three specific reasons given during a recent interview of Robert Zuccaro, CFA, Founder & CIO of Golden Eagle Strategies. He actually cautioned about inflation last February in an earlier interview, and published his findings…