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We prepare most type of tax returns:


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Gary Bode, CPA is a Master's Degreed, nation wide accountant offering tax and business services. Member of AICPA and NCACPA. Our virtual office provides excellent service to long distance and international clients. Call (910) 399-2705 for a free phone consult.

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Client Testimonials

I used Gary’s services to file my 2012 income tax return. This was my first year having an accountant do my return, as I have always done it myself using TurboTax. However, this year I had cancelled debt from my old primary residence which I was forced to convert to a rental property after relocating out of state.

While it didn’t cost me anything to do the short sale, the income tax consequence from the cancelled debt, roughly $50,000 in my case, was enough to move me from the 15% tax bracket to the 25% tax bracket.  Needless to say, I was concerned about that.

Finances were already tight and my husband and I are expecting our first child this fall. So the possibility of owing income tax was stressing me out. However, Gary was great at relieving my fears.

He is extremely knowledgeable, answered all my questions and was very thorough. I knew I was in good hands. He kept in constant contact with me throughout the process, keeping me updated on the progress of my return and letting me know what paperwork he needed to complete my filing.

In my mind, best case scenario would have been to not owe any taxes. Second best would be to only owe a little. Well, you can imagine my surprise and delight when Gary told me I was actually due a refund of a little over $2,700.00!

To top it all off, I found Gary’s fee for service to be fair, competitive and affordable; especially given the complexity of this type of return. I am so glad I did not try and go it alone this year. I am extremely pleased with Gary’s service and would recommend him highly to anyone, in fact I already have. If you have cancelled debt from a short sale or foreclosure, don’t freak out. Take a deep breath and call or email Gary. I am grateful I did.

Angie Falke of Holiday, FL

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Even though Gary enjoys helping colleagues, we no longer provide free consults to other tax preparers. He's happy to consult on an hourly billing basis if our schedule allows.

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Form 982 CPA discusses Cancelled Debt with Partnerships | Form 1065 instructions | Form 1065 U.S. Return of Partnership Income

Cancelled Debt CPA Form 1065 Partnerships Form 1099-C

Partnerships receive Form 1099-C(s) too. If you have a problem with the Form 1065 instructions, or don’t have local CPA well versed in Partnership cancelled debt, consider calling me for a free consult. (910) 399-2705.

Partnerships incur cancelled debt: Form 1099-C, Cancellation of Debt, isn’t just for individuals. Dealing with cancelled debt on Form 1065, U.S. Return of Partnership Income, can be tricky. The Form 1065 instructions aren’t all that great. Sometimes there’s too much information. Other times you have to integrate the Form 1065 instructions with other IRS issues like, say, depreciation

Essentially Box 2 of Form 1099-C flows into the Partner’s Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc., which then flows automatically to Line 21 of Form 1040 as taxable income. The main wrinkle is how much cancelled debt goes to each Partner. Partnerships have good flexibility with allocating who gets what. Sometimes that helps with tax positioning.

Form 1099-C, Cancellation of Debt, and Form 982, Reduction of Tax Attributes

The Partner then deals with the amount of cancelled debt on Schedule K-1 just as though a Form 1099-C got issued to them personally. Cancelled debt escapes tax on the Partnership’s Form 1065. But then you’re in the personal side of cancelled debt. We get a lot of contact from other tax preparers. You’ll see CPA comments on some posts and even a testimonial. So my perception is that lots of Form 982 confusion exists despite the Form 1065 instructions.

Good news? There are dozens of posts on personal cancelled debt on this website.

Partly because of the Recession, most Partnership cancelled debt is from rental property short sales, rental property foreclosures, etc. Here are the main issues on Form 1065, U.S. Return of Partnership Income:

  • The last Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation.
  • The “sale” of the rental real estate and subsequent gain or loss to the Partnership. Reported on Form 4797. You’ll love the Form 4797 instructions – lol.
  • Prior disallowed losses. I see returns where thousands of legitimate dollar tax deduction go unclaimed in the year of sale.
  • Partnership cancelled debt.
  • I look at the purchase and sales HUDs. Why? Partnerships sometime don’t claim buyer and/or selling expenses.

Our virtual office means distance isn’t a factor. If you don’t have a local CPA experienced in Partnership and personal debt cancellation tax reporting, and you like what you read, consider calling us for a free consult. (910) 399-2705.

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8 comments to Form 982 CPA discusses Cancelled Debt with Partnerships | Form 1065 instructions | Form 1065 U.S. Return of Partnership Income

  • Truman John

    Hi, He’s a different angle on Partnership debt forgiveness. I bought into a partnership with a 70K loan from the Professional Corp to purchase the shares. Half way through payment of the loan I decided to walk away from the partnership for various reasons. I gave up the shares I had received for free and the partnership forgave the rest of the loan. Do they need to give me a 1099-C for the 35K of the loan forgiven? Are taxes owed on the forgiven portion? I have had two CPA give contradictory information so far and would like a tie breaker.

    Partnership Breakup

  • Noelle Khalil

    would love to know on a partnership level, when a bank issues a 1099C for a debt that was cancelled for Real property, rental business and the FMV of assets is below the debt. i.e
    on the balance sheet BV of asset is 3,000,000 loan value 2,700,000 refi with another lender and the first lender 1099c of 900,000. the FMV based on bank appraisal was 1,700,000.
    I am inclined to prepare the 982 with real property indebtedness exclusion. and no basis adjustment to property.
    What is your thoughts I greatly appreciate it.

  • Dan M

    Can I use prior year passive losses to offset current year COD?

  • Joe W

    I have cancelled debt at the partnership level which I believe is correctly treated as recourse debt. The loan is on real property and is recourse to the partnership although it is non-recourse to the partners due to LLC protections. As such, the cancellation of debt produces a significant amount of COD income. Ordinarily, I would have adopted an insolvency position for the Taxpayer as the debt involved a highly underwater property and the COD income could have been eliminated under the insolvency rules. However, it would seem that the Taxpayer cannot claim insolvency based on the debts of the partnership as they are not personally liable for these debts. Is this a correct understanding of the insolvency rules?

    • Why didn’t your cancelled debt CPA invoke qualified business debt and/or insolvency at the partnerships level? Sound like some cancelled debt could have been reduced, ay least if I understand the situation correctly.

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