Debt-Related Tax Issues

Description

The Form 1099-C is probably not the whole story. Clients with properties lost to foreclosure, sold in short sales, and who have had debts restructured have complicated tax issues that impact both tax planning and reporting. IRC Sec. 108 says that income from forgiveness of indebtedness is taxable, but it offers a number of exceptions to that rule. This course will deal with handling such transactions, including working with clients who are considering debt settlement options and those for whom the transaction is completed before the CPA becomes involved. Participants will learn how to reduce negative tax outcomes by applying statutory exceptions to income recognition.

Highlights

• Cancellation of indebtedness income
• Classification and tax treatment of recognized gains and losses from the cancellation of debt
• Calculation of taxable income from foreclosure
• Short sales of real estate, including personal residences, rental properties, and commercial properties
• COD income recognition exceptions for lost deductions and contributions to capital
• COD income exclusions
• Information reporting forms: Form 1099-C and Form 1099-A

Objectives

• Determine how to prepare each schedule to the estate tax return (Form 706).
• Discover why teamwork among the taxpayer's advisors is crucial with Form 706 preparation and reduction of practitioner risk.
• Identify how to present returns to minimize audit risks.
• Learn the filing and due date requirements-- often the source of liability claims against accountants.
• Recognize protective and perfected refund claims with estate tax.
• Determine portability elections to benefit from the deceased spousal unused exclusion amount (DSUEA).
• Identify and discuss rules to deduct expenses and liabilities, including protective refund claims (and Schedule PC) and extra demands, as well as calendaring needed for your office.
• Learn how to work with formula clauses that express the estate tax marital deduction and credit shelter shares.

Designed For

Experienced tax practitioners who advise clients in financial restructuring, or reorganization in bankruptcy, and those who want to expand their services in this specialized area of tax planning and compliance.