What is Section 1017 property?

Section 1017 and the Treasury Regulations under section 1017 describe how any reduction in the ba- sis of the taxpayer’s property is to be made. A taxpayer may elect to reduce the basis of the taxpayer’s depreciable property first before reduc- ing any other tax attributes. §108(b)(5); Treas.

What triggers cancellation of debt income?

Cancellation of a debt may occur if the creditor can’t collect, or gives up on collecting, the amount you’re obligated to pay.

What is Section 1082 Basis Adjustment?

(1) Section 1082 (a)(2) sets forth seven categories of property, the basis of which for determining gain or loss shall be reduced in the order stated. A similar rule with respect to the remaining unabsorbed gain shall be applied in reducing the basis of the property in the next succeeding category.

Is Cancellation of debt passive income?

For purposes of section 469 of the Code, COD income is characterized as income from a passive activity to the extent that, at the time the indebtedness is discharged, the debt is allocated to passive activity expenditures and as income from a nonpassive activity to the extent that, at the time indebtedness is …

Does cancellation of debt increase basis?

In effect, cancellation of debt income realized by an insolvent S corporation and excluded under Internal Revenue Code Section 108(a) will be treated as a tax-exempt income item that flows through to the S corporation’s shareholders and will increase the shareholders’ bases.

What is a 982 tax form?

Form 982 is used to determine, under certain circumstances described in section 108, the amount of discharged indebtedness that can be excluded from gross income.

Why would a creditor cancel a debt?

A debt might be charged off. A creditor might also cancel a debt if they’ve had it too long and it’s not getting paid; they’ll charge the debt off on their books and inform the IRS of the cancellation. This is called a “charge off” or a “charged-off debt.” However, a charge off does not mean the debt is forgiven.

Is income in respect of a decedent taxable?

Income in respect of a decedent (IRD) refers to untaxed income that a decedent had earned or had a right to receive during their lifetime. IRD is taxed as if the decedent is still living. Beneficiaries are responsible for paying taxes on IRD income under most circumstances.

Is PPP forgiveness taxable?

Under normal circumstances, forgiven loan amounts are generally taxable for federal income tax purposes, but the CARES Act, under section 1106(i) of the act, expressly excludes the forgiveness of PPP loans from federal gross income, and thus federal income tax.

Is debt forgiveness taxable income?

In these cases, the benefit of being forgiven a debt will typically constitute a fringe benefit, and be taxed as such. Exclusions may also apply if the forgiven amount sees it included in the assessable income of the debtor. There are even situations where the forgiven debt gives rise to ordinary income.

What is a discharge of indebtedness?

Debt discharge is the cancellation of a debt due to bankruptcy. When a debt is discharged, the debtor is no longer liable for the debt and the lender is no longer allowed to make attempts to collect the debt. A debt discharge occurs when a debtor qualifies through bankruptcy court.

When to apply Section 108 to section 1017?

Section 1017(a) provides that when any portion of COD income excluded from gross income under section 108(a) is to be applied to reduce basis, then such portion shall be applied to reduce the basis of any property held by the taxpayer at the beginning of the taxable year following the taxable year

What is the definition of qualified property in SEC 1017?

Second the basis of qualified property which is land used or held for use in the trade or business of farming. Then the basis of other qualified property. For purposes of this paragraph, the term “qualified property” has the meaning given to such term by section 108 (g) (3) (C).

When to compute limitation on basis reductions under section 1017?

After reducing the adjusted bases of depreciable property under section 108 (b) (5), a taxpayer must compute the limitation on basis reductions under section 1017 (b) (2) using the aggregate of the remaining adjusted bases of property.

Can a taxpayer reduce basis under Section 108?

Thus, a taxpayer that elects to reduce basis under section 108 (b) (5) may, to the extent that the election applies, reduce only the adjusted basis of property described in paragraphs (a) (1), (2), and (3) of this section and, if an election is made under paragraph (f) of this section, paragraph (a) (4) of this section.