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Foreclosures and Debt Cancellation


In a recession many taxpayers find themselves unable to repay home mortgages, credit card debt or other personal or business loans. Foreclosures are an unfortunate occurrence during this time. Naturally, this event is emotional for taxpayers, and they look to their tax professional for guidance on how this affects their tax situation. When a foreclosure occurs, the result is a deemed sale of the property. If the creditor cancels the debt, the debtor may or may not have to recognize income. This course guides the tax professional through the rules for foreclosures, explains how to include or exclude income from debt cancellation on the debtor’s tax return, and explores the effect of excluding cancelled debt on the taxpayer’s other tax attributes.


Upon completion of this course, you will be able to:

  • Apply information from Form 1099-A, Acquisition or Abandonment of Secured Property, when reporting the foreclosure.
  • Determine the deemed sale price of the foreclosure property to record the taxation of a deemed sale.
  • Determine if debt is recourse or nonrecourse.
  • Identify the date a debt is cancelled.
  • Identify when creditors must issue Form 1099-C, Cancellation of Debt.
  • Determine if a taxpayer is insolvent.
  • Complete Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment).

Course Details

This course includes an e-book. CPE is issued after exam is successfully completed.


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