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IRS.gov Website
Publication 544
taxmap/pubs/p544-002.htm#en_us_publink100072287

Abandonments(p4)

rule
The abandonment of property is a disposition of property. You abandon property when you voluntarily and permanently give up possession and use of the property with the intention of ending your ownership but without passing it on to anyone else. Generally, abandonment is not treated as a sale or exchange of the property. If the amount you realize (if any) is more than your adjusted basis, then you have a gain. If your adjusted basis is more than the amount you realize (if any), then you have a loss.
Loss from abandonment of business or investment property is deductible as a loss. A loss from an abandonment of business or investment property that is not treated as a sale or exchange generally is an ordinary loss. This rule also applies to leasehold improvements the lessor made for the lessee that were abandoned.
If the property is foreclosed on or repossessed in lieu of abandonment, gain or loss is figured as discussed later under Foreclosure and Repossessions. The abandonment loss is deducted in the tax year in which the loss is sustained.
If the abandoned property is secured by debt, special rules apply. The tax consequences of abandonment of property that is secured by debt depend on whether you are personally liable for the debt (recourse debt) or you are not personally liable for the debt (nonrecourse debt). For more information, including examples, see chapter 3 of Publication 4681 Canceled Debt, Foreclosures, Repossessions, and Abandonments.
EIC
You cannot deduct any loss from abandonment of your home or other property held for personal use only.
taxmap/pubs/p544-002.htm#en_us_publink100072289

Cancellation of debt.(p5)

rule
If the abandoned property secures a debt for which you are personally liable and the debt is canceled, you may realize ordinary income equal to the canceled debt. This income is separate from any loss realized from abandonment of the property.
You must report this income on your tax return unless one of the exceptions below apply. File Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), to report the income exclusion. For more information, see Publication 4681.
taxmap/pubs/p544-002.htm#en_us_publink100072290

Forms 1099-A and 1099-C.(p5)

rule
If your abandoned property secures a loan and the lender knows the property has been abandoned, the lender should send you Form 1099-A showing information you need to figure your loss from the abandonment. However, if your debt is canceled and the lender must file Form 1099-C, the lender may include the information about the abandonment on that form instead of on Form 1099-A. The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. For abandonments of property and debt cancellations occurring in 2010, these forms should be sent to you by February 1, 2011.