Page 44 - Virtual Currencies

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Fileid: … tions/p525/2022/a/xml/cycle08/source
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
backup withholding may begin immediately. exceeds the FMV of the property, it's income in 2022 due to meeting certain work require-
The barter exchange will give you a Form W-9, from discharge of indebtedness unless it quali- ments, you may not have to include the can-
or a similar form, for you to make this certifica- fies for exclusion under Excluded debt, later. celed debt in your income. To qualify for this
tion. The barter exchange will withhold tax only Report any income from discharge of indebted- work-related exclusion, your loan must have
up to the amount of any cash paid to you or de- ness on nonbusiness debt that doesn't qualify been made by a qualified lender to assist you in
posited in your account and any scrip or credit for exclusion as other income on Schedule 1 attending an eligible educational organization
issued to you (and converted to cash). (Form 1040), line 8c. described in section 170(b)(1)(A)(ii). In addition,
If tax is withheld from your barter in- You may be able to exclude part of the the cancellation must be pursuant to a provision
in the student loan that all or part of the debt will
TIP come, the barter exchange will report TIP mortgage relief on your principal resi- be canceled if you work:
the amount of tax withheld on Form dence. See Excluded debt, later.
1099-B or similar statement. If you aren't personally liable for a mortgage • For a certain period of time,
(nonrecourse debt), and you're relieved of the • In certain professions, and
Canceled Debts mortgage when you dispose of the property • For any of a broad class of employers.
(such as through foreclosure), that relief is in- The cancellation of your loan won’t
In most cases, if a debt you owe is canceled or cluded in the amount you realize. You may have ! qualify for tax-free treatment if it was
a taxable gain if the amount you realize ex-
forgiven, other than as a gift or bequest, you CAUTION made by an educational organization
must include the canceled amount in your in- ceeds your adjusted basis in the property. Re- or tax-exempt section 501(c)(3) organization
port any gain on nonbusiness property as a
come. You have no income from the canceled and was canceled because of the services you
debt if it's intended as a gift to you. A debt in- capital gain. performed for either organization. See Excep-
cludes any indebtedness for which you're liable See Pub. 4681 for more information. tion, later.
or which attaches to property you hold.
Stockholder debt. If you're a stockholder in a Educational organization described in
If the debt is a nonbusiness debt, report the corporation and the corporation cancels or for- section 170(b)(1)(A)(ii). This is an educa-
canceled amount on Schedule 1 (Form 1040), gives your debt to it, the canceled debt is a con- tional organization that maintains a regular fac-
line 8c. If it's a business debt, report the amount structive distribution that is generally dividend ulty and curriculum and normally has a regularly
on Schedule C (Form 1040) or on Schedule F income to you. For more information, see Pub. enrolled body of students in attendance at the
(Form 1040) if the debt is farm debt and you're 542. place where it carries on its educational activi-
a farmer. If you're a stockholder in a corporation and ties.
you cancel a debt owed to you by the corpora-
Starting in 2014, you must include the in- tion, you generally don't realize income. This is Qualified lenders. These include the fol-
come you elected to defer in 2009 or 2010 from because the canceled debt is considered as a lowing.
a cancellation, reacquisition, or modification of contribution to the capital of the corporation
a business debt. For information on this elec- equal to the amount of debt principal that you 1. The United States, or an instrumentality or
tion, see Revenue Procedure 2009-37, availa- canceled. agency thereof.
ble at IRS.gov/irb/2009-36_IRB#RP-2009-37. 2. A state, territory, or possession of the Uni-
Repayment of canceled debt. If you inclu- ted States; or the District of Columbia; or
Form 1099-C. If a federal government agency, ded a canceled amount in your income and any political subdivision thereof.
financial institution, or credit union cancels or later pay the debt, you may be able to file a
forgives a debt you owe of $600 or more, you claim for refund for the year the amount was in- 3. A public benefit corporation that is tax-ex-
may receive a Form 1099-C. Form 1099-C, cluded in income. You can file a claim on Form empt under section 501(c)(3); and that
box 2, shows the amount of debt either actually 1040-X if the statute of limitations for filing a has assumed control of a state, county, or
or deemed discharged. If you don't agree with claim is still open. The statute of limitations gen- municipal hospital; and whose employees
the amount reported in box 2, contact your erally doesn't end until 3 years after the due are considered public employees under
creditor. date of your original return. state law.
Interest included in canceled debt. If any 4. An educational organization described in
interest is forgiven and included in the amount Exceptions section 170(b)(1)(A)(ii), if the loan is
of canceled debt in box 2, the amount of inter- made:
est will also be shown in box 3. Whether or not There are several exceptions to the inclusion of a. As part of an agreement with an entity
you must include the interest portion of the can- canceled debt in income. These are explained described in (1), (2), or (3) under
celed debt in your income depends on whether next. which the funds to make the loan
the interest would be deductible if you paid it. were provided to the educational or-
See Deductible debt under Exceptions, later. Student loans. Generally, if you are responsi- ganization; or
If the interest would not be deductible (such ble for making loan payments, and the loan is
as interest on a personal loan), include in your canceled or repaid by someone else, you must b. Under a program of the educational
income the amount from box 2 of Form 1099-C. include the amount that was canceled or paid organization that is designed to en-
courage its students to serve in occu-
If the interest would be deductible (such as on a on your behalf in your gross income for tax pur-
business loan), include in your income the net poses. However, in certain circumstances, you pations with unmet needs or in areas
with unmet needs where services pro-
amount of the canceled debt (the amount may be able to exclude amounts from gross in-
shown in box 2 less the interest amount shown come as a result of the cancellation or repay- vided by the students (or former stu-
dents) are for or under the direction of
in box 3). ment of certain student loans. These exclusions
are for: a governmental unit or a tax-exempt
Discounted mortgage loan. If your financial • Student loan cancellation due to meeting section 501(c)(3) organization.
institution offers a discount for the early pay- certain work requirements;
ment of your mortgage loan, the amount of the • Cancellation of certain loans after Decem- Special rule for student loan discharges for
2021 through 2025. The American Rescue
discount is canceled debt. You must include the ber 31, 2020, and before January 1, 2026
canceled amount in your income. (see Special rule for student loan dis- Plan Act of 2021 modified the treatment of stu-
dent loan forgiveness for discharges in 2021
charges for 2021 through 2025); or
Mortgage relief upon sale or other disposi- • Certain student loan repayment assistance through 2025. Generally, if you are responsible
tion. If you're personally liable for a mortgage programs. for making loan payments, and the loan is can-
(recourse debt), and you're relieved of the mort- celed or repaid by someone else, you must in-
gage when you dispose of the property, you Exclusion for student loan cancellation due clude the amount that was canceled or paid on
may realize gain or loss up to the FMV of the to meeting certain work requirements. If your behalf in your gross income for tax purpo-
property. To the extent the mortgage discharge your student loan is canceled in part or in whole ses. However, in certain circumstances you
Publication 525 (2022) Page 21