"Norm" <norm.pinnacle[at]gmail.com> wrote in message
news:a95b437e-805b-4bff-9f7b-4de864cddab8[at]v1g2000prd.googlegroups.com...
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If the level of debt relief is sufficient to make the client solvent,
if the client has other business or rental assets, you may
you may be able to to reduce depreciable basis in other properties
in lieu of recognizing taxable income.

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Norm wrote:
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Only up to the extent of insolvency, and with a corresponding reduction
in tax attributes. It's not a binary condition.

- quote -

At the federal level, yes, for acquisition debt on the primary
residence. Your state mileage may vary.

- quote -

Probably not.

-Mark Bole

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

The subject of a 1099-C (cancelation of debt income) has been well
covered in various posts. Given the taxpayer is insolvent, this
income can be forgiven. There's also the Mortgage Forgiveness Debt
Relief Act option for primary residences that is available.

I have a client who short sold rental properties. The client is
insovlent and was told by his attorney that he won't have to worry
about taxes. In reviewing his documents, I told the client that he
still has to report capital gains on the sale of the property as well
as recapturing depreciation that he has taken over the years. This
will result in a tax liability.

Now the client is upset and thinks I'm doing something wrong. Am I
missing something?

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >