Form 1099-A is Round 1, the “sale” of your rental property. Round 2 is 1099-C where cancelled debt becomes taxable income. Sometimes clients win by a TKO using Form 982 to exclude Cancellation of Debt from taxable income. Form 1099-A can be a huge tax advantage if the debt is cancelled yet. Need a free consult. (910) 399-2705.
Form 1099-A CPA accountants field lots of rental property cancelled debt questions, especially on how Form 1099-A affects the gain/loss on the rental property. Hi, I’m Gary Bode, a debt cancellation CPA with a virtual office to help you with your rental property foreclosure or short sale, wherever you live. Unfortunately, I’m still seeing rental real estate foreclosures and short sales in 2016. Plus, surprisingly, I speak regularly with Folks expecting a 2017 Form 1099-A, or Form 1099-C. Mortgage company Folks predict the 2016 tax season will see an increased number of rental property foreclosures, not because of the economy today, but because of the inherent delays with rental property foreclosure. I’m covering more than just the rental property Form 1099-A, Acquisition or Abandonment of Secured Property, because that’s usually just part of the process. Please note the Form 1099-A instructions are for the bank.
Typical Progression of tax reporting starting with Form 1099-A, Acquisition or Abandonment of Secured Property, rental property foreclosure, short sale, etc.
- The Landlord has a rough year.
- Four common scenarios:
- The bank forecloses on the rental real estate property.
- The Landlord short sells the rental property.
- The Landlord just abandons it.
- The bank allows deed in lieu of foreclosure.
- The bank issues Form 1099-A, Acquisition or Abandonment of Secured Property.
- Note we sometimes challenge that date, if possible and it benefits the landlord by lowering the tax due or increases the loss.
- The Landlord reports the last year of rental property income and expense using:
- Schedule E, Supplemental Income and Loss.
- Supplement the Schedule E instructions with the Form 8825 instructions (8825 is just a corporate version of Schedule C)
- Or IRS tax Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation.
- Form 8582, Passive Activity Loss Limitations, shows the landlord’s prior disallowed losses, if any.
- The landlord can deduct this on Schedule in the year of disposition.
- That’s part of why I always ask for a few back tax returns.
- The Form 8582 instructions are difficult to read.
- Prior disallowed losses accumulate over multiple years.
- So sometimes they don’t get carried forward if you change tax software or Form 1099-A CPAs.
- Schedule E, Supplemental Income and Loss.
- The Landlord calculates the gain on the “sale” of the rental property using Form 4797, Sales of Business Property.
- Excess loss in 2016 can be carried back or carried forward to offset income in other tax years.
- You might have to amend an earlier tax return.
- Sometimes you can just file Form 1045, Application for Tentative Refund.
- I’ve seen some tax software prepared back rental property tax returns with this tax calculation amazingly wrong. Reasons include the IRS, Congress, the tax software and the tax preparer.
- I always calculate the gain or loss manually because the IRS approaches it in a way counter intuitive, to me at least.
- The Form 4797 instructions won’t help you much.
- Try going to your local bookstore and pick up a current annual tax book. They’re written in English, not like highly stylized technical writing typical in IRS instructions.
- If the bank forgives part of the outstanding mortgage balance, they issue Form 1099-C, Cancellation of Debt. This can occur in a future tax year.
- Sometimes the bank forgoes Form 1099-A if debt cancellation on the rental property is simultaneous with the title transfer. They may just issue Form 1099-C.
- IRS Form 1099-C for rental property foreclosures and short sales triggers the same “sale” as the Form 1099-A.
- Form 1099-C just combines cancelled debt and “sale” information.
- Box 2 of Form 1099-C, Cancellation of Debt, becomes taxable income unless it can be excluded on Form 982.
- I sometimes use two Form 982 exclusions:
- Discharge of qualified real property business indebtedness.
- Insolvency.
- Any non excludable cancelled debt becomes taxable income.
- The reduction of tax attributes section of Form 982 may cause tax consequences in future tax years.
- Read IRS Publication 4681 to understand the reduction of tax attributes tax reporting requirements.
What is IRS Form 1099-A, Acquisition or Abandonment of Secured Property?
- The IRS mandates the bank to issue tax Form 1099-A under certain circumstances.
- IRS tax Form 1099-A means you’ve lost ownership of an asset to a lender.
- Form 1099-A doesn’t mean there is debt cancellation.
- Form 1099-A doesn’t always mean the lender won’t still try to collect from you - please see below.
- The amount listed on Form 1099-A isn’t cancelled debt, yet. It just reports the transfer of property e.g. rental property, repossessed cars, foreclosures etc., to the IRS.
- This means you might have to report the “sale” of that property, usually using the numbers on Form 1099-A. The IRS thinks this information is gospel, and you have to prove otherwise.
- Note the date and Fair Market Value are the most disputed issues.
- The three main figures on tax form 1099-A are the amount of mortgage loan balance owed, the date the property transferred to the bank and the Fair Market Value of the rental property as of the date on Form 1099-A.
Box 4 of IRS Form 1099-A, Acquisition or Abandonment of Secured Property
Box 4 of Form 1099-A show a Fair Market Value of the rental property at the time of foreclosure or short sale. The FMV in Box 4 is a soft number. Who knows what it’s worth until it’s sold? Sometimes I’ll build a case for a better number if that works to my Client’s advantage. A lower FMV means more loss on the rental property or less gain on the “sale” of the rental property; both possibilities work in the landlord’s favor, especially if there’s no cancelled debt yet. The IRS adds a few wrinkles to the calculation as well.
“Since there’s no debt cancellation on tax Form 1099-A, it doesn’t trigger use of Form 982. But Form 1099-A sometimes means a Form 1099-C is in your future. Don’t pay additional tax on debt cancellation reported on Form 1099-C until you’ve worked every angle of tax Form 982.”
- Gary Bode, CPA accountant and Form 982 specialist
What is Cancelled Debt?
Tax Form 1099-A, Acquisition or Abandonment of Secured Property is just Round 1. If your mortgage lender “forgives” (writes off as uncollectable) some or all of your loan balance, that amount becomes cancelled debt. The lender reports cancelled debt to the client and IRS via Form 1099-C, Cancellation of Debt. Cancelled debt becomes taxable income. Sometimes you can exclude cancelled debt from taxable income using Form 982, Reduction of Tax Attributes.
What about the Gain or Loss from Form 1099-A, Acquisition or Abandonment of Secured Property?
Form 1099-A triggers a reportable “sales” transaction that’s reportable to the IRS. Like a rental property foreclosure or short sale. You may have a reportable “sale” for IRS purposes. So let’s look at a short sale of a rental property as reported on Form 1099-A. Here’s the calculation components:
- Purchase Price of the rental property.
- Sometimes the landlord didn’t include all the expenses so we look at the purchase HUD.
- Using the buyer’s settlement costs alone can save $1,000 +/- of taxes due.
- Improvements.
- Usually any rental real estate improvements are depreciated separately.
- But they factor into the rental property foreclosure calculation.
- Sometimes they just increase the purchase price depending on the timing.
- Past depreciation; a huge big deal.
- The landlord has to recapture depreciation, to the landlord’s detriment, even if none was claimed on earlier tax returns.
- Sometimes your Form 1099-A CPA can get the IRS to allow all non claimed depreciation in the year of sale. Timing is tricky here.
- I’m talking about Form 3115. Read the Form 3115 instructions to see why Form 1099-A CPAs dislike this form. I mean really dislike it. But it works.
- Current depreciation from Schedule E, Supplemental Income and Loss, or, Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation.
- Prior disallowed rental property losses.
- You can see those on Form 8285, Passive Activity Loss Limitations, on the last tax return. AKA prior disallowed losses.
- The Form 8285 instructions won’t help.
- List your properties by name or address. Otherwise your 1099-A CPA has to calculate how much of the prior disallowed loss can be claimed on the 2016 tax return.
- That’s expensive and not a fun project.
- The Form 8285 instructions won’t help.
- There can be a huge amount of prior disallowed losses you can claim in the rental property’s year of sale.
- Sometimes six figures.
- I amend landlord tax returns that didn’t deduct the Form 8582 amount on the final Schedule E.
- You can see those on Form 8285, Passive Activity Loss Limitations, on the last tax return. AKA prior disallowed losses.
- Actual or imputed sales price.
- Form 1099-A includes an estimate of the Fair Market Value of the rental property as of the date of the 1099-A.
- This is usually high, so the bank can write more bad debt expense on its own tax return.
- Often it’s sold at a Sheriff’s auction for considerable less.
- Less is better because it generates more deductible loss for the landlord or less capital gain.
- Selling expenses.
- Anyone who’s ever looked at a HUD statement knows there can be thousands of dollars in seller’s settlement costs.
- Including the these settlement charges often saves another $1,000 of tax due.
Excess losses can be carried back or carried forward to offset income in other tax returns.
“Even though Form 1099-A implies loss, you still have to report the sale to the IRS. With rental real estate, the loss is ordinary, meaning you can use it to offset other income now or in the future.”
- Gary Bode, Form 1099-A CPA accountant
If the property sells before you file your tax return, use the actual sales price instead. You can amend a prior tax return if required.
Can your Lender issue Form 1099-A and still pursue you for the Debt?
Yes, unless they agree to cancel the remaining mortgage debt. If and when the bank forgives any debt they’ll issue a Form 1099-C. This can be years later and often comes as a surprise to the Client. Note the IRS expects you to report cancelled debt in the year it occurred even if no Form 1099-C got issued. So that means you have to infer Form 1099-C and then adjust that when the Form 1099-C arrives. Amending a past return is common in rental real estate cancelled debt.
Hint: if you receive a Form 1099-A, expect a 1099-C eventually. Banks get a bad debt reduction when they decide to write off the debt and Form 1099-C justifies that deduction to the IRS.
Form 1099-A Flows into your 2016 Year’s Tax Return
Check that all Information is Correct on 1099-A
Again, consulting your own Form 1099-A CPA is prudent.
- Box 1: the date.
- Be sure this is correct, since, at least on Form 1099-A, banks sometimes use December 31st by default.
- We challenge the date if there is documentation to justify an earlier date, and, that earlier date works better for the landlord.
- Box 2: Box 2 may not be definitive.
- Remember the bank uses this figure to prove its own bad debt expense to the IRS. So a high figure works in their favor.
- Box 4: If you need to declare a gain or loss on the abandoned property, the imputed sales price comes from one of several figures. Box 4 is one of these. But, the true FMV may be what the bank’s auction brings and could be less than the FMV on Form 1099-A. Form 1099-C has another wrinkle on the imputed sales price as well.
- The sales price of the next sale of the property is public record.
Disclaimer: no posting on this website is conclusive for your particular circumstances, regardless of how well researched and written it is. Cancelled debt, Form-1099-A, Form 1099-C, Form 982, foreclosures and short sales are all complex. Obtaining a professional opinion is prudent. The discharge of qualified real property business indebtedness and insolvency exclusions of Form 982 aren’t straightforward. Form 4797, Sales of Business Property, covers lots of situations and it’s easy to get lost.
We’re a Cancelled Debt CPA firm that prepares rental property foreclosures and cancelled debt tax returns. Our virtual office allows us to serve you wherever you live and wherever the rental property is/was. We have hundreds of postings on this site, many dealing with Form 982, Form 1099-C, Cancelled Debt, insolvency, short sales, foreclosures, etc. If you need a free phone consult, give us a call at (910) 399-2705.
Find me on Google+
Like me on Facebook
I did a short sale on my rental home. I received 1099C for $82000. I purchased the house for $225K and sold it for $160K. After all the expenses the bank received $144K. I also have carry over losses from stock sales also.
Do I have to pay taxes on 1099C gain?
Will you be willing to prepare my taxes? I live in Redomd, WA
Thanks.
Ved Goyal
It’s not as easy as that Ved. Sometimes it’s a choice between excluding cancelled debt from taxable income or paying on the gain. Form 982 required you adjust the basis of the short sale property. It can be tricky.
Hello Gary,
A Form 1099-A was received which shows the FMV (amount sold for at auction), but records indicate that the home was resold within 3 months for $59,000 more. This actual FMV would significantly reduce any COD.
If the lender sold it for less than FMV, to an investor for cash lets say, but the real value was higher, can we make any changes to the FMV for tax purposes?
Thank you,
Lori Smith
Sure Lori. We’d just document that FMV carefully and file a paper return with the supplemental information and cover letter. Hope that helps.
I received a 1099-C for discharge of qualified principal residence indebtedness. I also would like to claim my home office deduction. Does one affect the other? If so, how?
It can Sheri. You may have to recapture the depreciation from your home office. Hope that helps.
Is that something I would do when we sell the house?
Sorry Sheri, my dashboard doesn’t allow me to see an earlier post and I don’t remember the issue. Call me, I’m working today (Saturday) until 7 PM ET.
Ok so I did a short sale on two duplexes. Bank had me sign saying they wouldn’t pursue deficiency but would report 1099, I have not received 1099 as of yet. My capital gains taxes are somewhat mangageable but if I have to add the 1099 income it will be over 100k and I believe we were insolvent but don’t know how to calculate that. so I’m told around August I can check with IRS to see if there is a 1099 they filed, if so I can match return and file by October 15th. If they haven’t I’m told they may not file one and there is a statute of limitations on when they can file a 1099. So is the form 982 in order possibly here?
Yes Mark, at the end March we still had client’s receiving 1099-C and 1099-A despite the fact they were due on 1/30. They may have sent your’s to a different address. It’s also common to have folks call because the IRS received a 1099-C that the client didn’t report on the tax return. So we have to amend the original return. Since we usually can write off the 1099-C through Form 982, the penalties are minimal and we can sometimes get the remaining pena;ties abated. I’d extend and then pull the IRS transcript to check. Hope that helps.
Do these same rules apply when filing for an estate? What happens if you close the estate before a 1099-C is generated?
Hi Kathy: I’d have to research Form 982 and Form 1099-C for estates. That’s a new twist for me. But my guess is yes, it applies. If you’ve filed you just amend to include Form 1099-C Hope that helps.
I have a slightly different problem - I have the 2008 homebuyer credit involved. We filed bankruptcy in 2011, and the home was foreclosed in 2012. The lender is reporting the trustee sale as the FMV which is nearly 100k more than the house is really worth. Because of this, it looks like we have a gain requiring us to repay the homebuyer credit - but now (6 months later) the house has a new purchase pending for 45k less than what we originally paid. The bank is not responsive and the IRS told me the bank is supposed to use the trustee sale amount as the FMV. I really don’t have the funds to repay the credit, and honestly don’t think I should because there was no gain on the house.
Sorry, left out the question - is there a way for us to file additional paperwork to show that the FMV on the 1099-A is inaccurate? If it makes any difference, this was an FHA loan.
Sure Jamie, we sometimes contest the FMV on IRS tax Form 1099-A if that works to your advantage. Hope that helps.
That is a different twist Jamie. Ouch. Is the IRS already asking for the Homeowner’s credit back? It sounds like you could contest it. Let me know if you need help with it. Otherwise good luck.
I am completely lost on 1099a that I received on my rental property
Value of the house 55000
Sold at the auction for 330000
Is the difference minutes depreciation and expenses and rental income which is clearly negative capital loss or ordinary loss
Rental property losses can be ordinary income, capital gains income or a combination of both. It’s a complex calculation much of which derives from the re-captured depreciation.
We received 1099A and C for a rental property and filed a tax return accordingly in 2010. The bank then continued to pursue debt collection, which we just settled in 2013. They have sent an amended 1099A for 2010, but not a 1099C. I would like to amend my 2010 tax return because I will be getting more $ back since not all of the debt was forgiven, but can I do that without 1099C? What if they send 1099C later and for a different tax year?
Interesting issue Julie. It sounds like you received a 2010 IRS tax Form 1099-C for the rental property? And that hasn’t been amended, yet. So the 1099-A may increase or decrease the rental property “sale” for 2010. I’d ask the bank to issue the amended 1099-C for 2010. If they won’t, perhaps you can make a case for the reduction of debt forgiveness without the amended 1099-C through documentation of the 2013 settlement? It sounds like the bank may issue a 2013 1099-C. Hope that helps.
This is a very informative comment stream! Maybe you can provide a recommendation for my situation? I had a foreclosure on a commercial rental property owned by my S-corp earlier this year, for which I had a personal guarantee on the mortgage. Long story short, I am expecting a 1099-C at some point for the cancellation of debt to the tune of $300k. Is there any way to offset the gain realized by the cancellation with the S-Corp’s property loss due to the foreclosure? And based on the timing of when I receive the cancellation, would I be able to amend a past return to offset it? Thanks in advance!
I sent you an e-mail Sam
My question is “when” to report the sale transaction on the tax return (what year).
Received a 1099-A on a Rental Property during the year 2012.
The date was 11/21/2012 (box 1).
The balance of principal outstanding is $295,000 (box 2)
The FMV is $325,000 (box 4).
[FMV is greater than outstanding loan balance]
Property was sold for $378,000 during the year 2013 (06/15/2013).
Thank you for your reply.
Hi Bob: you’d report that Form 1099-A in 2012. If you’ve already filed you’d need to amend it to include the Form 1009-A. You’d have a taxable gain or loss. No offense but it doesn’t seem like you’ve got a good handle on the gain/loss calculation. Use For 4797.
1099-a form also.
line two is 72314036
line 4 is 25635.00
help what does this mean?
Hi Lisa. Line 2 on Form 1099-A is the outstanding mortgage balance on the date of the title transfer. Line 4 is the Fair Market Value of the property on the date of the transfer. These figures don’t jive, maybe you made a typo. Box 4 is what you’d use on Form 4797.
Hi Gary. Following relocation I have been renting what was my primary residence for the past 4 years. The property was deeded back to the bank in 2013 and I have received a 1099-A. Is this considered rental property that would be reported on Form 4797 and does it qualify for the Mortgage Forgiveness Debt Relief Act? Thank you.
Hi Jeff, sorry about the loss of the rental property. Form 1099-A triggers a reportable “sale” and you must use Form 4797 to calculate your gain or loss on the transaction. No cancelled debt taxable income exists unless a Form 1099-C gets issued. Sometimes this can be in a future tax year. No it doesn’t it qualify for the Mortgage Forgiveness Debt Relief Act, but it sounds like once you receive a Form 1099-C, Cancellation of Debt, you’ll be able to exclude it through Form 982, Reduction of Tax Attributes. Hope that helps.
Mr. Gary Bode
I just received a form 1099-A due to a foreclosure. We entered into agreement with the bank
The bank has agreed to do the following, which is reflected in the agreement:
1. pay the sum as mentioned to you
2. delete the trade line from your credit
3. waive deficiency (cannot come back for any amount not collected at a sheriff’s sale)
4. we sent them the keys last week and told them the property was vacant.
in box 2 it shows 139,000.00 and in box 4 it shows 196,000.00
What does this mean? Thanks for taking the time in reading this and your help.
Brad
OK Brad, sorry about Form 1099-A and the foreclosure. My guess is that a Form 1099-C will get issued too. I wouldn’t file 2013 tax returns until I was sure. Sometimes the Form 1099-C arrives late. Form 1099-A just reports the “sale’ of the property to the IRS. This sounds like it was your personal residence. If so, any gain on the sale probably escapes taxation and any loss can’t be deducted. Once you receive a Form 1099-C that amount in Box 2 becomes taxable income unless you can exclude it using Form 982. Hope that helps.
Hi Gary,
I owned a home for 7 years. I lived in it until I got married and relocated out of state. I rented it out while I was out of town. While going through a divorce I was in the process of moving back home and notified my tenant that I would not renew the lease, because I needed to move back in. The tenant stopped paying rent and I had to take him to court. Once I received possession of my property, I realized he had destroyed it substantially to the point of no return. I had no choice but to include it in my Chapter 7 bankruptcy, because I did not have the money required to repair it to reoccupy the home. The last time I reported the home was on my 2012 taxes. I received a 1099-A for 2013. I am not certain if I should report it on my taxes, Turbo Tax says that if it was my primary residence that the 1099-A does not need to be reported. I did not receive rental income on the property for 2013. I surrendered the property at the meeting of the creditors. Do I have to report the 1099-A since it was my intention to reoccupy the home as my primary residence?
Hi Nile, as a landlord I sympathize. Well, it’s unclear whether this was a primary residence by IRS standards. They provide a time line. But even it was I’ve seen cases where not reporting the he 1099-A, Acquisition or Abandonment of Secured Property, triggered a later IRS Notice CP2000. So even it is a $0 tax issue I’d report the 1099-A. Hope that helps.
Hi Gary
I received a 1099A on a condo I owned. Unfortunately I bought it in 2006 at the height of the market. I lost my primary source of income and could not keep up with the mortgage payments and the condo fees as they doubled during my ownership. I tried to sell the property through a Realtor and finally tried to get the bank to approve a short sale or a deed in lieu of foreclosure. Nothing seemed as the bank kept changing loan administrators and the process would have to essentially start over. Finally the bank did foreclose and the property went to auction. I have a 1099A but not a 1099C as yet. I am pretty sure the property has now sold for substantially less then the FMV indicated on the 1099A so I expect to get a 1099C. My loan was a conventional loan which I paid a down payment of the full 20% which I have lost. The basis is going to be at 3X what the property was sold for. There is no way I can pay that significant tax. I have looked at Form 982. It does not seem like there is any formula there. If there is a possible deduction of tax liability, how is it calculated as it does not seem that you can deduct any losses as you could on a business property. This seems highly unfair to the average homeowner that has gone through some tough times.
Hi Richard, the answer depends on whether this was a primary residence or rental property. Sounds like a personal residence. Sometimes I use a different “sales” price than appears the Form 1099-A, Acquisition or Abandonment of Secured Property, or Form 1099-C, Cancellation of Debt. Even without much info it seems like you’d have an IRS reporting obligation with a $0 tax result. If you’d like us to prepare the tax return give me a call. 910 399 2705.
Hello I had three S Corporation that owned the land , building and convenience store gas station . The bank foreclosed on the property and took everything. They have only issued a 1099A for tax year 2013 . The foreclosed in July 2013 and allowed us to operate the store until it sold in October. Form 1099A shows the loan balance and FMV as of July when they took it over. But in October they sold it for more than the FMV. When I asked the bank if they were going to issue a 1099C because we were personally liable for the debt they would not give us a answer . My question is do I report the sale with just the 1099a ? Do I use the sale price or FMV to determine gain or loss ? What if they don’t issue a 1099c until years later? I don’t what to report a gain this year and then have the cancellation if debt as a gain in later year when the bank decides to issue a 1099C if they even do. We have a second mortgage on the loan with another S corporation convenience store we still currently own. Just unsure on his to handle this 1099A . Some people tell me it’s not reportable because debt wasn’t cancelled if that’s the case how do I dispose of the assets in the corporations ?
Any help would be appreciated . Thank you
It looks like you’re a tax preparer. Sorry Lori we don’t do consulting work during tax season but are available again in May.
Hi Gary,
Our situation: Partnership owned a multi-tenant retail building financed with a CMBS. In 2013, CMBS servicer foreclosed on the building with mutual release of liability. Partnership received 1099-A showing Box 1-10/1/2013, box 2-$3.9M, box 4-$5.5M. No 1099-C received yet. Building cost-$3.3M, adjusted basis-$2.2M. So would the sales price reported on form 4797 be the lower of box 2 or box 4 in this case? What if we know that Box 4 is highly overstated? We have seen this property marketed on auction sites for $3M. Partnership obviously would have sold the property itself if the property was worth more than the loan balance. Thanks in advance for your insight.
Hi Dave: well I sometimes build a case for a better FMV. The IRS allows a few options. It sound like the Partnership needs a real estate CPA given the large numbers involved. Cancelled debt, when it happens, is tricky for Partnerships. Form 1099-C could be late. Ask the banks, or if it doesn’t come I’d extend and then check the IRS records in May to see if they received it. We would love to prepare that return for the Partnership and/or the Partners.
In reading your responses, I have a question. I received my 1099-A form Jan 2014. The sale of the home was June 2013, is it possible to receive a 1099-C later this year? Can I ask BOA if now will be generated and request that is sent to me? Also, should I wait until next tax year to include form 1099-A if in fact I might receive a 1099-C? And what if you filed Chapter 7 while the home was in foreclosure and the home was listed in the bankruptcy? Does the fact that the home was listed in the bankruptcy not help this entire tax loss/gain situation?
Hi Jamica: You’d include Form 1099-A on the 2013 taxes. It is possible to receive a Form 1099-C later this year or even in 2015. Bankruptcy would still require you to File Form 982 when the 1099-C arrives. I always tell Client to the ask the bank about it. Sometimes we just extend the tax return and ask the IRS if they received a Form 1099-C for 2013.
Hello,
My husband (not husband at the time) bought a house in Virginia back in 2008. I moved with him shortly after and we were married. He is active duty military and in 2010 we received Perm Duty Station Orders to FL, where we now live. We tried renting out the home but couldnt since we lived so far and couldnt afford a realtor to handle it for us. Long story short we paid the mortgage up until we couldnt anymore while we rented our homes in FL. We eneded up doing a VA COmpromise Sale that closed December 7, 2013. The bank issued us a 1099-A and said we WILL NOT receive a 1099-C because the investor (VA) did not waive the deficiency. According to everything I have read the VA will not actually collect from us. My question is, do we need to report the 1099-A on our taxes? Does it qualify for the Mortgage Debt Relief Act? And if not, will we owe taxes on this or is there another tax break for us? At the time of sale our debts exceeded our assets (not many assets at all). Also the balance of principal on the 1099-A is $75,120.66 and the FMV is $125,000.00. Please help because we cannot afford to pay taxes on this and noone ever explained this to us.
Hi Janey. Form 1099-A, Acquisition or Abandonment of Secured Property, does not incur cancelled debt. Your only obligation is to report the “sale” on your tax return showing the calculation of gain or loss. So there’s tax reporting hoops to jump through even though there’s no additional tax due. If not you’ll have the IRS asking about it later. If you receive Form 1099-C, Cancellation of Debt, you can use Form 982, Reduction of Tax Attributes, to exclude the cancelled debt income in Box 2 from becoming taxable income. No worries.
Thank you for your response. I have been researching ITS publications and pub 523 explains that if we qualify to exclude the taxes on the gain that we dint have to include the sale on our taxes. Is this true or should we include it anyway so that the IRS doesn’t come tous later even though its their publication?
I’ve seen cases where the IRS asks about it in a future year. I always try to avoid that for Clients Janey. I’d shut the issue down now. But you’d have a good defense if they do come back at you.
I received a 1099a for timeshare property I wasn’t able to pay for anymore due to change in my income.. I had already filed my taxes on line and I just received the 1099a.. I tried to amend my tax return but the turbo tax software said I didn’t need to file this with my taxes.. It asked if I had a 1099c which I haven’t received.. I want to make sure my taxes are amended correctly.. What should I do.. Do I need to wait on the 1099c??
It sounds like Turbo Tax is wrong Mandy. If it’s a 2013 Form 1099-A, the gain or loss on the sale of the timeshare needs to be reported. Maybe the lender won’t forgive any of the mortgage debt and intends to pursue collections. We’re happy to amend that return for you.
Received 1099-A on rental property that was included in bankruptcy. Even though this property was part of the bankruptcy, will the bank be able to come back later to try collect on debt?
Sorry Marie, you’d need to ask an attorney.
Gary,
I lost my rental to foreclosure in 2013. I filed my taxes before I received a 1099-a. I got bad advice. I thought the foreclosure would not be reported until 2014 considering the bank still has the house up for sale. I purchased the house in 2006 as a primary residence and the last 4 years I have rented it out. Do I need to file an amended return and if so will I lose my return that I received? box 2 $169005 box 4 202486. If I owe money can I prove that i’m insolvent. I appreciate your help
Sorry Mark. Yes you’d have to amend that return. In my experience as a real estate CPA, most times that amended return shows a loss you can even carry to other years. Without amending the IRS will surely ask you about it later, they’re good on potential revenue documents.
I have an odd situation with respect to my short sale and how to report the sale/loss and forgiven debt.
I completed a short sale on my property, I was using it as a rental. I had a VA Loan on the property. I called the bank (today) to ask about when I would receive my 1099-C or if they could give me the details and also went online to my old account to find tax info. The bank representative stated that they would NOT be issuing a 1099-C since it was a VA loan. After the sale the bank sent a letter saying they would not try to collect the forgiven debt from either myself or the VA.
Since I won’t have a 1099-C, do I claim the forgiven amount as income since I was using it as a rental and thus fill out the Form 982 and 4797. Even with the amount of the forgiven debt (income) I can still show a loss and have a carry over loss from the previous year as well. Plus which amount would I use as the forgiven debt since sometimes the numbers vary compared to what is on the HUD1. Or do I just do the schedule E and the 4797 and not worry about the 982 since I have no 1099-C?
thank you for your help
I don’t know the answer Alicia. I’d have to research the VA and IRS rules, sorry.
I did a short sale with PNC mortgage last year. I qualified for hardship as I had to move for a job out of state. I started the process in March, the FHA preforeclosure sale occured 9/27/2013. I was not delinquent the entire time (I made all house payments, paid to have the lawn mowed, paid all the utilities, etc.) In July PNC told me they could not even approve the short sale unless I was delinquent (I learned later that I only had to be 31 days late on the date of sale, so that was even wrong). I did not pay August’s payment, so they approved me in September. I did not pay September’s payment and we closed on 9/27. At no time did I abandon the home and I did NOT turn it over to the bank. It was a sale to another homeowner. Their paperwork states they would report to the credit bureau as “Legally satisfied for less than full debt.” And that is true…all 3 reporting credit agencies do say that.
They sent me, however, a 1099-a (not a 1099-c) and state because it’s a government loan, they are REQUIRED to only send me the 1099-a (and that they will NOT send me a 1099-c).
This was my principal residence and I did the short sale in 2013 to take advantage of the sunsetting Mortgage Debt relief Act! Shouldn’t they have to send me the 1099-c? Also, on the 1099-a they showed the balance owing as $259,900 (which was true) but a FMV of “$0.00” Their appraisal was for $192,000 and it sold for $192,000 (after all the closing costs they netted $168,900 I think.)
A couple of questions:
1. How can they send a 1099a when it was NEVER abandoned and they never took back ownership (it transferred from me right to the new owner.)
2. Does it even matter? I think it does.
3. Can I force them to do a 1099-c when they have already agreed to forgive the deficiency in writing?
And lastly, I had rented out a room in the house (20% of square footage) as a owner-occupied primary residence and taken some deductions and depreciation for a couple of years. I didn’t take it all for the year or two before the sale. It wasn’t a “rental property” (i.e. commercial). How is that going to affect my taxes?
What a mess. Thanks!
Sorry Carly. Maybe a lawyer can answer how to force a banks to do something. I do sometimes challenge a “bad” number with cancelled debt tax returns. Seems to work, or at least we haven’t had any IRS issues with it. Splitting a house into rental and residential is tough too. It is a mess. We’d happy to prepare that tax return for you.
Hi, Gary.
I’m Executrix for my mother’s Estate (she died in 2012). We had to let the bank foreclose on her home because we had no other options. I just received a 1099-A. I have no idea what to do with this form. I had already done a tentative version of the Estate’s 1041 (glad I didn’t file it yet!), but had no clue I’d be getting any more tax documents, least of all the 1099-A, which came just today. Is there a separate Federal form I need to file for the Estate’s 1041, since it seems the 982 doesn’t apply in this case? I appreciate any advice you can offer. Thank you.
Hi Tina. Sorry for your loss. You can use Form 982 with Estate tax returns. I think the real question is whether Form 1099-A applies to your Mom’s final tax return or form 1041.Hard to tell without seeing the complete picture.
I received a 1099A on a rental property in 2011. On my 2011 return I reported the “sale” of the property on Form 4797. I used Box 2 (balance of principal outstanding) of 1099A as my sales price, since the was less than the FMV as stated in Box 4 of 1099A. I realized a gain on this property in 2011 due to recapture of depreciation. I just now received a 2013 1099 -C for the same property. Box 1 is 9/28/13, and box 2 is the same amount listed in Box 2 of my 2011 1099A. It appears I can exlcude this from income under the Qualified Real Property Business Indebtness exlcusion by using form 982. However, it appears I would need to reduce the basis of the rental property by the amount I am excluding. How do I do this if I “sold” this rental property in 2011. I dont have any other rentals or business property, no NOL, credits etc..
Sorry Adam, this is too technical to answer here. You may need to pay a tax preparer this year. Sorry. We’d be happy to prepare it for you.
Hi, Gary. Great information on your site! We have the following situation with a primary residence that was converted to a rental property in 2010 after moving out of state. The property was originally purchased for $234,400.
• Had issues receiving timely payments from the renters during the period of time they were in the house (6/28/10-April 2013). The renters did not make any rent payments starting in late 2012 and finally moved out of the home in April 2013. We were not able to make payments on the rental property and our current home during that time, which is what put the rental house into foreclosure. We considered the home a rental property until it foreclosed on 6/4/13 and was sold back to the bank for $110,000.
• OCWEN took over the servicing of the loan from GMAC mortgage in early 2013.
• The bank sold the foreclosed home to new owners on 8/29/13 for $130,000.
• We continued to receive erroneous documentation from OCWEN up until mid-January 2014, from multiple departments, indicating they were going to force-place insurance on the home, etc. Sent a letter and a copy of the deed from the foreclosure multiple times to different depts / locations at OCWEN.
• Received a 1099-A from OCWEN with incorrect information the first week of Feb.
• Called OCWEN about the incorrect 1099-A and they said they would open a research request on it and send out a corrected 1099-A within 5-7 business days. We have not yet received the corrected one yet but should have based on what they told us.
• 2 days after receiving the original 1099-A, we received a substitute 1099-A from OCWEN with partially correct information (they used the foreclosure amount as the Box 4 sale price instead of the sale price when the bank sold it after the foreclosure. We do not think this is the corrected 1099-A as it’s from a different OCWEN department and location in the US.
• We have not received a 1099-C. Person I talked to at OCWEN said it should be issued the same year as the bank sells the house (after the foreclosure), which would have been for 2013.
1. What to do about the two 1099-As that do not match? We will call the bank again tomorrow about it but based on our experience with them over the past year, are not confident we will ever get a form with the correct information. We are concerned that they issued two different 1099-As and neither are correct. Not sure how they will report this to the IRS or what we should do to document what actually is correct.
2. Would you recommend that we paper file our taxes this year instead of online so we can provide additional information/commentary? If so, is this something you could assist us with? We want to make sure this is done correctly and this is way out of our area of expertise. We usually use TurboTax, which recommends getting the help of a professional in relation to 1099-As.
3. Because we live out of state, we wanted to confirm there would not be anything we should file in regard to this foreclosure with our state return for the state in which we live now. We have been filing two state tax returns ever since we moved, to note any income/loss from the rental property. Please confirm there isn’t something with the foreclosure that would result us having to note it on our current state’s income taxes.
Thanks in advance for your help!
Sorry Patty, there’s way too much here to comment on.
Hello, had a question about a 1099-A I received after filing taxes. Filed taxes and received a 1099-A several days later (of course) - this is on a second home that I’ve owned for 10 years but never lived in. Family lived there most of this time and paid me rent. They moved out early last year and I had no luck finding new renters or selling the home, couldn’t afford the payments without the rental income either. House not been foreclosed on yet, but I received a 1099-A for abandonment of property. Box 2 is 87,400, Box 4 for FMV is 124,000 - it shows an abandonment date of 6/1/13.
Do I need to file an amendment to report this 1099-A? House has not even been foreclosed on yet, and I filed a ch. 13 bankruptcy in December of 2013 and it was mentioned in the bankruptcy that this home would be surrendered.
Not sure what forms I need to fill out or what I need to do here, thanks.
Sorry to hear about it Elizabeth. My guess is that the Form 1099-C is coming. I might wait until May or so before amending the 2013 return. I’m happy to prepare that tax return Elizabeth.
I received a 1099-C for short sale in 2013 in Florida. Moved to NC April 2013. I have federal form 982 filled out. When filing my North Carolina taxes how is the income on the 1099-C handled? Thanks..Lewis
Sorry Lewis, this is too complex to handle in a comment.
Received a 1099-a from a time share property. Balance of principal outstanding is $14,739.46 and fmv is $17,400. Box 1 is 5/31/2013. Do I need to file this for 2013?
Yes Rhonda, it sounds like a 2013 Form 1099-A. The rules for tax reporting means you’d file a Form 4797 to report a gain or loss on the “sale” of the timeshare. I’m happy to prepare the 2013 returns if you wish Rhonda.
Received a 1099-A form a rental house that was discharged under a chapter 7 bankruptcy. Do I need to fill out a 982 form? Should I just wait for the 1099-C? I can’t seem to find a straight answer anywhere. I appreciate the help, thanks
Hi Brian: IRS Form 1099-A doesn’t trigger cancelled debt income like Form 1099-C does. So no Form 982 is required, yet. I’d wait on the Form 1099-C if possible, but that may arrive much later or even in 2015. Hope that helped.
New client, received 1099-A in 2012. AARP did 2012 return as sale of personal residence; did not deduct large loss. Property was actually investment property. 1099-C was received in 2013. I amended 2012, generated a large NOL that has to go back, too late for election out of carry back. If I book 1099-A in 2012 and roll back loss 2 years and carry remaining NOL to 2013, costs taxpayer approximately $70k. If I record 1099-A and 1099-C in same year, 2013, taxpayer gets $9k refund. Approx. $70k swing by going back as opposed to booking both A and C in 2013. Difference due primarily to 1099-C being so large in 2013, all at much higher bracket.
Can I record A and C in 2013, even though A was received in 2012 and C was received in 2013?
Thanks for your thoughts.
Hi Nick. Always nice to confer with another CPA. Technically you’d have to get the bank to re-issue Form 1099-C. But I have challenged the dates of a few Form 1099-As and Form 1099-Cs. You’d make a case for the better date, send it with the tax return and hope it flies. Hope that helped.
4 years ago I filed chapter 7 bankrupcy. The bank FINALLY forclosed on the property. It was our primary residence. (did so last year). Recieved a 1099A Stating we are responsible for the debt? ( aprox 40,000). Is this true? Do we need to file the off-set amount even if we filed banrupcy and the house was rolled into it?
Sounds like you hit a rough patch Lisa. But good news IRS Form 1099-A, Acquisition or Abandonment of Secured Property, doesn’t trigger cancelled debt. But it does mean you have to calculate a gain or loss on the “sale” of your home. So a tax reporting hoop to jump through to generate no additional tax due. Form 1099-C, Cancellation of Debt, may arrive later that does trigger cancelled debt. Then use Form 982, Reduction of Tax Attributes.
US Bank still hasn’t issued my 1099a. Don’t they have to get all tax documents out by January 31st? I’ve called many times only to be told ‘it’s in the mail.’ I asked if they could email it to me and they said I’ll get it w/in 24-48 hours. Of course, that time has passed and I have nothing. I have to get my taxes done and this is posing a huge problem for me. Any suggestions as to how I get my 1099a from US Bank?
Hi Lacey. This is a common scenario. The IRS has a copy of your Form 1099-As, if they’ve been issued. Maybe extend your tax return and pull your IRS record of account in May or so. Hope that helps with your rental property issues.
Hello…I operated a Chapter S corp, a daycare center for twenty years. We closed the operation in 2009 buCoot kept filing tax returns due to debt. In 2013, the building which i purchased for 250,000 (and I have no mortgage on) was sold due to me not paying property taxes over the past three years. We tried to sell the building for four years but to no avail. I am closing this business December 31, 2013, so that I don’t have to file a return in 2014 since the only remaining asset is gone. How do I report this or deduct this on my tax return? I know I get a schedule K1…. there is no income only expenses, and this building loss. Do I file a form 4797 and subtract the cost of what I owed in property taxes against the fair market value of the business? and then put that amount on the K1 and file an 1120 for the corporate tax return?
Hi Angela. Stressful situation. You would have to file a final 2013 Form 1120-S, US Tax Return for an S Corporation, and include Form 4797. That sale calculation gets tricky. It sounds like you need a tax pro for 2013. If you think so too, please give me a call ay 910 399 2705.
Yes I received 2 1099A’s for the same property from Fannie Mae and bank I had loan with. Their FMV differ by over $50,000. How do I report both or do I report only one. Which FMV would I use, and it’s a loss, so would there be tax liability. Any advice would be appreciated.
Hi Adam I would use whatever FMV on the IRS tax Form 1099-A(s) works best for the client. Hope that helped.
Should I even report it on my 2013 tax return when I file. Need help and ur input please.
Yes you need include it. Maybe you need a tax pro AMA because the number is different that the account value.
I received a 1099a. Box 1-4/1/2023 Box 2 - 74,526.65. Box 4- $120,802.54. The loan value at the time of purchase was 75,617.00. I am in the process of filing my taxes. What do i do with form? Thanks you for your help.
Hi Shirley. You’d use Form 1099-A to complete Form 4797 to calculate a gain or loss on the sale, foreclosure … ,if it was for a business property. Same idea but different process if it was your home. Hope that helps.
Hi Gary!
My husband and I had a BK 7 discharge in March 2012. We did not receive any forms until March of this year(2014), a 1099-a. We had already filed our 2013 taxes. Our attorney said we do not have to file or amend the form since it is not a 1099-c. I am just confused. Some say yes while others say no. The mortgages included were primary residence refinances. It had been our primary residence from 2003 to 2009. From 2009 to beginning of 2011 we rented it out while we lived in another state. We then took it back to our primary residence in June of 2011. The property was surrendered to the bank in 2012. We did not include a 982 or anything for the year 2012 either. What would you recommend? Which year would I correct, if any? My other question is why a 1099a would trigger a CP2000 if it causes no change in what is owed? Just want a bit of clarification. Thank you!
Hi Amanda. Form 1099-A reports a transfer of title, in this case a rental property. You need to file an amended tax return that includes Form 4797. It’s likely you had a loss on the property meaning that an amended 2013 tax return might generate a refund. Let me know if you’d like some help with that Amanda. 910 399 2705.
Hi Gary, your information is priceless!
I have a client with the following situation :
- purchased home as primary residence in 2002
- moved out and started rented it out in 2005
- last tenants moved out in 2009 after trashing the house. The landlord had no money to fix it so they abandoned it in 2009.
- they just received a 1099-a for 2013.
My question is : is this property considered a rental house even though it hadn’t been rented since 2009 or is it just a second home as of 2013?
Thanks to much!
Hi Stephanie, I would do a bit of tax research on that issue. When there’s any doubt I look it up. Hope that helps.
Greetings, Gary. Thank God for your expertise and helping people. I have a dilemma. My husband foreclosed on his home back in 2007, with a FVM of $446K and a Principal Balance of
$336,356.00 and a mortgage interest of $10,984.00 received from Payer/Borrower. That bank never sent my husband any notice even before he moved out of the house,and he never received any notice from the IRS either. According to the IRS’ transcript my husband now owes $18+K for penalties accrued all that time due to the not replying and for non filing for 2007.
I would really appreciate it if you could advise me on what we need to do.
Ouch Ethel. It sounds like submitting an amended 2007 return is in order. No guarantees, but it doesn’t sound like there would be tax due once we address the 1099-A. I’d check with the IRS for a Form 1099-C, Cancellation of Debt, lurking in 2007 or some later tax year. We handle these types of issues Ethel. Have your husband call me, perhaps. (910) 399-2705
I received a 1099-a box 2 is $223k box 4 fmv is $0.00. What does this mean?
Hi John, what that means is you’ll have a huge ordinary loss this year if Form 4797 is filed correctly. Very cool. Box 2 means nothing. But if you receive a 1099-C later there may be additional tax due. I’d love to do that 2014 return for you. 910 399 2705
Sorry for my lack of understanding. Is ordinary loss a good thing or bad? What exactly does this mean? Can you process tax returns in Maryland?
In the warped IRS universe an ordinary loss is best John. Sure we have MD clients so that’s not a factor. Call me if yiy wish later this afternoon or tomorrow. 910 399 2705
I just received 1099-A. Box 2 38185.42 & Box 4 38185.42. What does it mean for them to have the same amount. Thanks
It means the bank thinks the Fair Market Value of the rental property(?) is the same as the unpaid mortgage balance, Casey. You know that can’t be right. I’d challenge that to help generate a deductible loss.
Gary,
I abandoned a primary residence 4 years ago. a couple of years back they forgave the 2nd. They finally foreclosed in November. It went to auction, but didn’t sell. I called and they gave me the numbers for the 1099-A over the phone, but said they aren’t filing a 1099-C. The debt was $232K and the FMV was $291K, essential the 1st and 2nd combined. If this is reported as a “sale” is 59K considered a taxable gain?
Yes it’s a taxable gain. But if you can establish an earlier date, complying with the IRS definition of primary residence you can escape that gain.
Gary:
I (live in FL) just received a 1099-A (have not received a 1099-C) that shows a balance of principal outstanding of $189K (box 2) and a FMV of $206K (box 4). It is odd to me that the FMV amount is so high (and more than the outstanding balance)…My former property foreclosed in June 2014 and the bank won the auction with an offer of $84K. What do you think is going on here? The property was my primary residence for 4 years and then we moved and rented it out for 9 months. After the 9 months we tried to work with the bank and 3 years later it ended in the foreclosure mentioned above b/c we did not meet any FHA loan requirements for other options.
What should I do?
Hi Loren. You can use the 84K figure. You’d need to prepare the final Schedule E. Calculate the gain or loss on Form 4797. And finally exclude the cancelled debt using Form 982. I’d be happy to prepare that return for you. Lots of IRS quirks with the circumstances you’ve given.
Thanks Gary — shouldn’t I wait to do anything with this until (if) I get a 1099-C in the future or is the IRS expecting something related to the 1099-A to appear on my return?
My understanding is that the debt isn’t officially forgiven until a 1099-C is generated by the bank. Is this correct?
Loren
Hi Loren. Yes you’d have to complete Form 4797 for the gain or loss. Remember you can claim prior disallowed losses in the year of sale. I wouldn’t wait on the 1099-C. It arrive years later. So, if you were my client, I’d gather a bit of info to help us with the 1099-C now for the future since looking for things in the past for a “current” event is harder. Hope that helped. Happy to handle that return for you.
Hello, Our bankruptcy was discharged in January of 2013 and our primary home was forclosed in march of 2014. Both my first and second mortgages were discharged in the bankruptcy and I have already filed my taxes for 2014 but just received a 1099-A form for my first mortgage. I am guessing that i will receive a 1099-C for my second mortgage. Both mortgages were discharged in bankruptcy. Obviously i need to amend my return to include the 1099-A but when i receive my 1099-C, I am guessing i will need to amend again to include that. Since bankruptcy is involved should me filing a form 982 take care of my tax liability on the discharged debt?
Sorry Melissa. There’s no real tax consequence with the 1099-A, although the IRS will send you a CP2000 Notice. If you generate a loss on the sale you can’t deduct it. If you have a gain, there’s a 250K capital gain exclusion. I’d extend my taxes. I’d wait for the 10099-C until the IRS opens it’s 2014 tax files, maybe June or so. Then you can pull all your records. Hope that helps.
I received a 1099A for the forclosure of my primary residence. My principle balance was $39,417.57 they have fmv as $45,693.82. Box 1 has a date of 6/05/14. The house is being advertised for sale online for about $8,000. I dont understand this. I don’t know where to go from here. Can you give me some advice.
Sure Tamika. That means you have a deductible loss on Form 4797 on the purchase price less the sales price. Nice. If and when 1099-C gets delivered you’d pay tax on the cancelled debt, 39.4 less 8k, unless you include a properly completed Form 982. Hope that helped.
I rec’d a 1099A for a rental property I owned. Box 2 seems correct but box 4 says $250. Should be between 90k - 110k according to a website and I feel is accurate for the neighborhood. Home was bought for 110k 7yrs ago. Bank still has the home and they will not change box 4 amt.
Using the value I think is correct (100k), form 4797 shows a gain due to recaptured depreciation. Do I owe taxes on that as well?
Thank you for all your help and information to people.
I’d suggest relying on the $250 as the sales price Tom. The IRS assumes that’s right. I’d be happy to handle that return for you.
Reading these comments and trying to see if they relate to the 1099-A I received for surrendering my timeshare. I read the comment to Tamika and I am confused. I thought a deductible loss could not be taken on a personal residence.
I can’t access anyone else’s comment right now but you can’t have a tax deduction from the sale of your home. However, during the recession some Folks rented their former homes. Sorry if I mis-spoke.
Hello Gary,
I’ve been reading all the Q and A’s hoping to get some of my own questions answered, and I think it has but I just want to be sure I’m understanding it correctly: I received a 1099-A for my home that’s been foreclosed. We have it covered under CH7 bankruptcy. The bank told me they were not going to send my anything, but after doing my taxes of course I receive the 1099-A. Clearly I need to do an amendment but from what I’m reading in your earlier comments, I should receive a 1099-C at some point, correct?
Ho Bobie. Yes you need to amend the prior tax return and calculate the gain or loss on the “sale” of your home. No tax due. But the IRS will pursue you until you deal with it. Let me know if you want us to amend that return. No worries. 910 399 2705
I did a deed in lieu in Jan of 2014 on a rental house that I was letting my son live in for a very small amt of rent over the last 14 years. The amt of the mortgage was approximately 141,000 and per Chase Bank the FMV at the time was 156,000. They are not issuing a 1099C or A because they actually made money on the deal and I suppose I lost 15,000. Do I have to file this on my taxes and if I do where do I start?
You’d file Form 4797 with your 2014 tax return Val. Make sure you claimed all past depreciation. Look at last year’s Form 8582 to see if there are prior disallowed losses. Happy to prepare the return Val. (910) 399-2705.
Hi Gary,
We are in the military. We purchased a home. We got orders to leave and couldn’t sell the home so we rented it out for 3 yrs. When the renters moved out we still couldn’t sell it or rent it out the entire last year we had it. Finally we did a deed in lieu. We got a 1099A from the lender.
Box 2: $129,397.64
Box 4: $124,000.00
Box 5: Not checked
What do I do with this 1099-A?
Hi Sherry. You need to report the “sale” on Form 4797. Sometimes we challenge fair market value and the date if it works to Client’s advantage. Hope that helped.
We did deed in lieu on our home in 2014 signed papers April I got 1099a showing principal 63000.00 fmv 21000.00 house still onmarket. This was our primary residence. No 1099c received . Will we owe taxes
NO Kim. If you lose money on your home you can’t deduct it. If you make money selling your home the first $500,000 isn’t taxable. Just be sure the IRS knows it’s your primary residence. No worries Kim.
Hi: Nice article, thank you.
I had a primary home foreclose on in June 2014 in NC (divorce), I now live in Texas. I just received a 1099-A. The difference from the outstanding balance and the FMV is $87K. Box 5 is checked and my X and I are on the loan.
I had someone tell me that that meant it was cancelled debt.
I didn’t think that was the case as I have not received a 1099-c (I hope I receive one soon).
I will file my taxes and report it appropriately as I am still insolvent and the ‘Mortgage Forgiveness act’ was renewed for 2014.
My questions are:
In your experience, don’t most clients receive a 1099-c after a 1099-A?
In NC, don’t banks have one year after the title transfers hands to pursue one for a deficiency judgment?
Thanks for all of your help.
David
Hi David, report 1099-A and calculate the gain or loss n the house. There’s probably to tax involved but you want the IRS to know the 1099-A is dealt with and is for a primary residence. I don’t know the answer for your second question without some research.
I am confused as what is my cancelled debt or if it is cancelled debt with a 1099 a from deed in lieu. Is the principal in box 2 my cancelled debt and what about the fmv. Does the mortgage debt act cover me
Well it depends on whether it was your primary residence or rental property Kim. Form 1009-A incurs no cancelled debt. You need to report the “sale: on Form 4797. Don’t rely on your software, calculate the number. If it was your primary home mortgage debt should cover you if you fill out Form 982 and associated Forms correctly.
Also I received 1099 a and my husband received one in his name if we file separate do we both include it
Sure Kim, if you file separately it would only appear on his tax return.
It was primary residence so do I just fill form 982. Do I only complete line 1e and 2 on that form. Is amount discharged the amount owed on line 2 of 1099a.
Hi Kim. Form 1099-A generates no cancelled debt. So no Form 982. You’d report the gain or loss on IRS Form 4797. Read the Form 4797 carefully; don’t trust the default value of your tax software. How that helped.
Short sold my home, va gaurenteed, sales price, 175,000, though after expenses, sale proceeds were 152,000 on a loan balance of 235,000. 83,000 was deficient.
VA ended up paying lender 62,000. So really only had a deficiency of 21,000 Which my 1098 statement says.
Received 1099c from lender, they claimed the entire $83,000 as a loss, even though the loan balance was only 21,000. Isn’t this illegal?
I’m sorry for you troubles Amy but you’d have to ask a lawyer about legal matters.
Good morning Gary! Great website very informative and your knowledge is appreciated!
We completed a Deed in Lieu with Wells Fargo on 12/18/14.
Loan Balance $161k
FMV $125k
Box 5 is checked
I just efiled a few days ago and now received this 1099-A. Should I file an amendment or wait for the 1099-C? I assume its coming unless Wells Fargo is coming for the $40k balance. In your opinion, what are the chances I can get this forgiven under a 982 form?? I cant afford for $40k to be added in as “income”.
Thank you in advance.
I’d amend now Mellisa to include the sale of the property. The IRS will be all over that. I’d probably include the 1099-C too per the bank statement. The 1099-C declaration is correct but I’ve never seen them penalize you for it.
Thank you so much for this site! We did a deed-in-lieu in 2014, and have received a 1099-A but no 1099-C. I have always done our taxes myself in the past. It sounds like I can probably just file the 1099-A myself for now, since it doesn’t mean cancelled debt yet, but when the bank gets around to sending the 1099-C, that’s when I will need prof help. Do you have an opinion on that?
Also, if the property has been used as a rental but was most recently occupied by my husband for about a year, do you know if it counts as a primary residence?
To qualify as a primary residence he would have had to live there 2 of the last 5 years. With the 1099-A you have to use Form 4797 which includes deprecation recapture, possibly using Form 3115, and claiming prior disallowed losses lurking in Form 8582.
Hi Gary,
I am in NY and did a deed in lieu as well in 2014 and got a 1099-A. I spoke with a CPA who told me that I should not be expecting to receive a 1099-C. Yet everywhere else on the internet including this site it seems to say that I should be expecting a 1099-C. I spoke with my bank and their rep tells me that I should not be expecting a 1099-A.
Please help me unravel this mystery!
A 1099-C is likely in the future. Why? That’s how banks document their bad debt expense on their own tax returns
My brother & I purchased a home together on Feb 2004 (loan contract under both names). He lost his job & we had to let the home go thru foreclosure. We had a 1st loan(PNC) & 2nd loan(Wells Fargo). The house was sold at auction in February 2012 for the loan owe on the 1st loan(PNC)$232K . The 1st bank never went after us for the payments but the 2nd loan did. 3 years later I received a 1099c from the IRS saying I owe tax on $145k for the cancellation of debt. They somehow only listed me as the sole person responsible for the $145k. Perhaps my brother was unemployed for 5 yrs & don’t have any assets. Is there something I can do to minimize or cancel this $145k? All the money we had was put back into maintaining the house before we had to let it go. It was my primary home at the time b4 I lost the home to foreclosure. Is there any law that can help people like us. All we are doing is just trying to keep our head above water? I filed an extension on my tax this year & will need a accountant for this. Appreciate any advice on this.
Thanks.
Yes Lee, we can probably reduce or eliminate the 145K. Call me 910 399 2705
had a home office and took depreciation. House abandoned. is depreciation taken taxable or does it qualify for qualified real property business debt?
Depreciation is taxable. But it qualifies for Form 982 Dawn. You should owe close to nothing for the abandonment. Hope that helped.
Hi, Gary,
I am getting caught up with taxes after being laid off and unable to pay for some time. I had to walk away from the house five years ago. Though I have never received one, my Wage and Income Transcript shows a Form 1099-A with a difference of about $72,000. On the line “Was Borrower Personally Liable for Repayment of the Debt,” it has “Neither Box Checked.” I’m not sure how to proceed. Should I contact the lender? Since I never received a 1099-A, though one apparently exists, I’m suspicious that perhaps a 1099-C also exists? The Date of Lender’s Acquisition of Knowledge of Abandonment, according to the 1099-A was Aug. 2010.
Well Tina you have to put it into your tax return so the IRS knows you dealt with it. But you’ll owe no tax. You might check for 1099c in 2011 - 2014 tax transcripts. Hope that helped.
Gary,
Only the lender who suffered the loss can file the 1099 a correct? We have a situation where a servicer of a note (secured by a mortgage on realty) is attempting to argue that it’s servicer can file a 1099A with the IRS.
Our understanding is that 26 USC statute 6050 P controls.
As a 1099A form is generated to reflect the gross transaction amount as the basis for establishing a capital gain or loss on a sale, only the party who lent the money files the form,
correct?
I don’t know Terry, sorry. Ask an attorney I only deal with 1099-A(s) that Client’s receive. However it’s an interesting question and I’d appreciate an answer when you find it.
Hi Gary,
I received a 1099-C from the lender on my personal residence. The debt discharged was $1.1M and the FMV on the form is $1.35M. The property sold for $1.2M. Since the FMV and sale of property were greater than the discharged debt, will I have to report COD income?
Yes Jackie, sorry you lost your home. You have to report the 1099-C, Cancellation of Debt. Hopefully it’s a 2014 1099-C which means we can eliminate any taxable income via Form 982, Reduction of Tax Attributes. Cross your fingers in hopes Congress extends that qualified mortgage exclusion for 2015 otherwise you’re left with only the insolvency exclusion which may or may not help you.
Hi Gary,
Thank you for your reply. It was actually for 2012. Would I report the $1.1M as income and then reduce it by the same amount using Form 982 or would I use the FMV?
I’m sorry Jackie, WordPress didn’t show the comments on this posting. Otherwise I’d be happy to help.
I am a Georgia resident. I’m attempting to locate a blank 2005 1099-A and a 1099-OID. I can’t find them anywhere. Where can I find/purchase those forms? Thanks.
The IRS has them online. Google 2005 1099-A. If you can find the current 2014 form there’s also a link to prior years on that page.
Hello..Home went through foreclosure..agreed to a summary of judgement that included a waiver of any and all deficiency..owed 187,000..bank bought back 115,400..( 100.00 )..12/14 date..sold home 03/15 for 173,000..If a 1099c is issued what would be the forgiven amout..Florida..FMV at that time was 159,000..thank you for your time..
I think in both cases it’s what you owed on the mortgage less the value of the property Marty. Or maybe I’m not understanding the question.
Hi Gary, I only received a 1099-s from the title company. We short sold our investment property in 2014 and the gross sale leaves us with about a 300k gain on paper, though we actually received nothing and a significant portion of that was penalties and interest from the lender. Thus, the gain was never tangible with exception of about 100k with which we took out and bought our principle residence. Help! The investment property was previously our principle residence but over 5 year ago.
You’d have to call me Brian. Too complex for a comment. 910 399 2705
Hello: I need your firm to complete a Form 4797 or at least I think that’s what I need. Purchased a commercial rental property in 2005 and lost to foreclosure 5/29/2014. I did not receive 1099C or any other form. Purchase price was $1.587,000 and depreciation from line 18 of Schedule E depreciation was approx. $380k. My mortgage balance was around $1.3M and property sold for around that which may be why I didn’t get a cancellation of debt form. It was not sold on the sheriff’s
steps but to a buyer I was in contract with after the foreclosure (ouch!)so I did not receive any
final statement. I am getting exact figures but would like to know if you think I will be paying any taxes based on an adjusted basis. Thanks so much for your response!
Sorry I missed this Gloria. It would be on the adjusted basis less the sales price. You can ask the IRS for your tax record by year.
In 2014 I file Chapter 7 Bankruptcy and was discharged, later that year did a Deed in Lieu on my real estate portfolio, I received a 1099-A from the mortgage company that listed the Fair Market Value at $1,770,000 and the balance of the loan at $1,646,827,000. The properties all sold in 2014-2015 for approximate $1,200,000. My basis in the property is $300,000 I am being told that I should challenge the FMV since there is clear evidence that the properties were only worth $1,250,000 and sold off for much less. Otherwise, I will have a gain of almost $1,470,000, FMV - Basis = capital gain.
So I have a few questions, first of all, is this correct?
Second, if I challenge the 1099-A and I’m successful at changing the 1099-A and reducing the Fair Market Value, would I turn a capital gain of $1,470,000 into ordinary income (debt forgiveness) - which is taxed a higher rate. Out of the frying pan and into the fire!
And finally, how difficult is it to challenge a 1099-A and how do you do it? This was an investment property so none of the normal primary home exclusions would apply.
That’s way too complex for a comment Steve, sorry. I know it’s frustrating. You’d have to engage us. 910 399 2705.
Hi Gary,
My husband when in 1/2 with a buddy on a rental house. Of course it went south and hubby lost his job too. With an attorney, they tried every avenue to work with Chase and they were denied. Finally, bank foreclosure was granted with sale on 11/2011. There were no bids. House was sold in 6/2012. First off, never to date have we received a 1099-A OR 1099-C. For the 2011 tax year, we conservatively estimated the FMV of the house in order to report the sale / abandonment of the property in the year it happened. This created a LOSS that granted a larger refund for that year. The house sold for $150,000 less than what we actually owed on it. Based on court documents, Fannie Mae was listed as the plaintiff - there was a switch from Chase to FM during all this. Anyways, should I be concerned there was never a 1099A or 1099C issued? Based on my readings, 1099C can come anytime, but is there a statute of limitations involved here? Or do taxpayers just wait from year to year for the ball to drop? Isn’t it strange that we never received a 1099-A? I have checked my county records and I can’t locate a deficiency judgment against our home. When does that happen? I know a lot of questions - but just 1 more. If the 1099C comes for the 2015 tax year, at what point on the calendar year do I take a snapshot to figure insolvency on form 982?
Thanks a bunch for your insight.
Happy Thursday Sue. I would file a 4506T which will show you what the IRS has on your husband. Two scenarios:
The IRS often receives the 1099-C and the taxpayer doesn’t. Until there is a 1099-C I’d sit tight if the IRS doesn’t have a copy.
Now I’m unclear on the bank letter you reference. If they say the remaining balance is cancelled of forgiven you need to amend 2011 since the IRS demands you report cancelled debt in the year uncured even if there is no 1099-C. Hope that helps. If you need to amend please call me at 910 399 2705
Hi Gary,
My husband purchased a rental property here in Florida back in 2008 for 230K. After the purchase the property valuation had drastically fallen following the housing market decline, in addition the property had Chinese drywall issues. In 2013 he filled for Bankruptcy in which the home was included in his filings and was included in the discharged so he was no longer liable for the mortgage. Before the bank was able to foreclose, the HOA foreclosed on him for lack of payment on HOA fees. It seems they purchased the property for $1300 when we look at the county website online. My question is, do we need to wait for the bank to officially foreclose on him to file a form 4797 loss of business property, even though the HOA is now the owner of the property and had foreclosed? The property went to auction earlier this month but it was cancelled for some reason so it has yet to sell so I don’t believe the bank will send a 1099A or 1099-C.
Another question I have is: how do we calculate the loss on the property. The FMV per the county is 150K. By my calculation its an 80K loss minus the depreciation we included in the past two years puts us at approximately a 70K loss. Am I calculating this correctly? As well we aren’t responsible for the cancellation of debt due to his bankruptcy per the IRS correct? Are we able to write off the loss to off set W2 income? and can we do it when we file our 2015 taxes?
Sorry for all the questions, but I’m trying to figure this out and I do think after the answer I will need a CPA for the filing come this tax year.
Thank you in advance for your help,
I believe we spoke Aishah. Hope things turn out well.
I did a Deed in Lieu on my real estate portfolio, I received a 1099-A from the mortgage company that listed the Fair Market Value at $1,770,000 and the balance of the loan at $1,646,827,000. The properties were then sold by the bank for $1,250,000 within 3 months of my deed in lieu transfer date.
Should I challenge the FMV since there is clear evidence that the properties were only worth $1,250,000 and sold off for much?
This lower FMV should help lower my taxable gains.
Thank you.
Hi Steve. You can challenge the FMV, you’d just proof of the $1,250,000 and a bulletproof tax return. I sometimes send a note with the tax return and additional documentation.
Long story short:
Purchased house in 2007 for $320000
Lived in it as primary residence until July 2012
Had to move for job.
Started renting house out August 2012 for an amount less than the payment was, so we were bleeding our savings dry making up the difference.
Decided to stop making mortgage payments (couldn’t sell as the market had tanked) in November 2012. Kept it rented as we didn’t want it sitting empty waiting for the foreclosure. (We still live about an hour away so there was no way to love back in).
House finally foreclosed this August 2015. Trustee Sale! No bidders, reverted back to the bank, starting bid $252,000. House is bank owned and on the market and shows as pending sale at a listed price of $265,000
We expect a 1099-A and/or 1099-C to arrive.
Now we are facing grave tax consequences with this upcoming canceled debt and have no idea who to turn to. Can you help?
Well Laney, sorry, you have multiple issues going on. Form 982 for cancelled debt. Form 8582 for prior disallowed losses. Schedule E. Form 4797 with depreciation recapture. I think I’m your guy though if you don’t want to tackle it yourself. 910 399-2705.
Hi Mr. Bode,
Lost rental in 2014, owed 151k on it and the bank bid in full the total 151k at sheriff’s sale. Last year received a 1099a showing box 2 and box 4 both at 151k. Does this mean I won’t get a 1099c? The house eventually sold la tee in ’15 for 125k, can I assume I’ll get a 1099c for the difference? Thanks
Hi Jeff. Well the 1099-A means just a sale. Sounds like they’re thinking about collecting the balance. My guess though is you’ll receive a 1099-C eventually. Hope that helps
Thanks for all your helpful information. I have a question on sale/abandonment/repossession of real property without transfer of title - yet.
Rental property surrendered in 2010 bankruptcy
Property loan discharged in same bankruptcy
Possession and control of property delivered to, and accepted by, note holder in 2015 (settlement agreement)
No foreclosure to date, no deed-in-lieu
No 1099-A expected for 2015
Question is, do we report this in 2015 as a sale/abandonment using the FMV of the property or the loan balance as the ‘sale price’? Either way we have a loss…but using the FMV will increase that loss considerably.
Thank you so much!
It’s the Fair Market Value on the date foreclosed Jan. Hope that helps.
Gary - do you mean we have to wait until the foreclosure is completed to report? That could take years - been 6 years already with no foreclosure started.
I think a foreclosure happens when it happened. However you can abandon it and report it that way Jan
Thanks Gary. Would the abandonment ‘sale price’ be the FMV or the unpaid loan amount?
There’s a few ways the IRS calculates sales price Jan. But my guess is FMV in your case.
Thank you, Gary. Appreciate what you do for all of us.
Thanks Jan, I try.
Would a foreclosure be considered a form of debt collection? Or the financial institution that makes the foreclosure? It is really important that I get an answer to this question. My son hanged himself in his basement after an illegal foreclosure without any proof services. He was only 43 years old. Thank you, Char
Sorry to hear that Charlene. No it’s not debt collection.
Gary,
I had three short sales in 2013 and was issued a 1099 C, I had a CPA filed incorrectly showing I owed around $85,000 Fed and $15,000 state, I went to another CPA, did an amended return which included for 982 stating I was insolvent, I was under a lot of pressure to get info to second CPA and estimated some of the info on the insolvency worksheet. After about 10 months, the Fed accepted my amended return and I eve got a small refund. Now I am being audited for the 2013 Amended return. I have to show I was insolvent, if I can use the price that the three houses sold for in the short sale I am clearly insolvent, my questions is, will the IRS allow me to use the short sales process as the FMV? If not, how in the world would i calculate FMV from 3 years ago?
Thank you for your time.
Hi Ed. Sounds like a mess. From your post it does sound like the sales price is FMV.
Would a short sale be considered a “distressed property” or “distressed sale?” I ask because I want to be sure a short sales price is the FMV, the IRS website says FMV cannot bet “distressed” for it to be FMV, what’s your take?
Hi Ed. We always use FMV with a short sale. Hope that helps.
I’m sorry, do you mean you take the short sale price as the FMV?
Hi Ed. Sorry I don’t have the original question and reply to respond, sorry.
I was just asking if you use the short sale price as the FMV when calculating insolvency. I was audited by the IRS and found out after I asked you that yes, they do.
Thank you,
Ed
OK Ed. Sorry you’re being audited.
Maybe this is a better question: If one files chapter 7 and is discharged of a debt from the mortgage company on a primary residence and they vacate the home by either a foreclosure or a short sale, which of the two options will allow for one to avoid being responsible for taxable income?
Does this help? My goal is to not be hit with taxable income.
Bankruptcy is best Stacey. Then a Form 1099-C isn’t files, or if it is filed you just jump through a few hoops.
please help….I filed bankruptcy last year which only included my house. I did this because I had been behind on payments after job loss,then once I had income they wouldnt take a payment unless it was a lump sum. Filed bankruptcy which allowed me to start making payments. Just this March I left the home and it was about to go to foreclosure but I decided to do a short sale. The mortgage company accepted an offer. My mortgage loan is aprox 181,000.00 and the shortsale price is only about $120,000.00. Additionally the value is only about $145,000.00.
Im told doing a short sale may result in owing IRS money because this will show as income. Would it just be better to foreclose or go through with the short sale?
Which one will I get taxed less on? Is there any way to avoid being taxed?? I will never be able to pay it back in this lifetime, not on my income.
thank you for any help,
Stacy M.
Gosh Stacy that would require a lot more information and is too complex for a comment. Sorry.
Rcvd a 1099-A today from our home in IL that we lost to foreclosure last year. How long could it take to receive a 1099-C if it does come? Is there a set tax percentage on loss between the Balance of principal and FMV? l is Box 2 was $211K and Box 4 was $146k, Box 5 is checked. Please advise.
Thank you for your help.
Hi Michelle. You’ll get a Form 1099-C if and when the lender cancels the remaining debt. That could be yesterday. Or it could in 2017. There’s a wide variation.
Hi Gary, great sight, here is my question,my daughter foreclosed on house rec.1099a outstanding balance 64000 fmv 55000 box 5 x then rec 1099c event date 11/17/15 box 2 debt discharged amt is 17105.28. House went to auction. She called bank and they would not help. Can you explain what this all means..Thankyou for your help..
Hi Andrea. Sure. Read other cancelled debt posts on this website. Also IRS Pub 4681 might be helpful.
Hey Gary,
Bought house in Maryland for $289. Owed $182k (box 2). Retired at 65. Couldn’t afford house payment. Moved out of house. Arranged for Deed in Lieu with bank. They gave me 6K for keys. 1099-A shows house value at 244K (box 4) but right now it has a pending sale at asking price of 214K. Just received 1099-A. Do I have a tax owing for anything (other than the 6K, of course.) Do I ask for 1099-A? or 982? Kathy B.
Hi Kathy. You probably had a loss from the short sale. But you probably have cancelled in the amount of the remaining mortgage less the selling price and cost of sale.Hope that helped.
My husband and I bought a home at the peak of the market in 2006. We lived there for 6 years. We moved in 2012 & rented the property at a loss for a little over a year. When the renters moved & broke their lease, we realized we were not cut out to be landlords. We put the house on the market & it eventually sold as a hardship short sale in May of 2015. There were 2 loans & both were considered paid in full by the banks. We are trying to figure out if we can use the mortgage tax relief act or if we should go for insolvency. We were insolvent at the time of the sale, which is why the short sale was approved, however we also used the home as our primary residence for 2 of the 5 years before we sold it. I have already received one 1099-C & expect the other to come any day.
What do you think would be our best bet?
That’s a horror story Rebecca. If it was your primary residence two of the last five years prior to the hardship sale you can use the primary home mortgage exclusion. Otherwise you can only use insolvency. Hope that helped
Hi Gary,
In October of 2015, I completed a DIL with Wells Fargo as the servicer and Freddie Mac with the mortgage loan. Yesterday I received a 1099-A stating $265K in box 2 and FMV of 270K. Box 5 was not checked. Will I receive a 1099C as well? Or when does the “Cancellation of Debt” occur?
Thanks and take care,
Leo
You’ll get a Form 1099-C when the bank cancels the debt Leo. But if you don’t note the IRS expects you to self report a Form 1099-C in the year the DIL took place. Hope that helps.
Gary,
I had a foreclosure sale in 2013 and the bank sent me a 1099-A in 2013, so I filed a 982 on the debt because we had an agreement with the bank for no deficiency if I let them foreclose. Now I just received a 1099-C on the same debt with the same numbers as the 2013 1099-A. When I complete my 2015 tax returns, how do I show the IRS that I already took this debt forgiveness into consideration in 2013? Do I simply fill out the 982 again for the same insolvent reason? The signed stipulation that the bank and I signed reflects “Plaintiff agrees to waive its right to seek a deficiency judgment against defendants.” So in my opinion, this was when the debt was actually cancelled using the IRS criteria. Your thoughts would be very helpful.
Hi John. Well it sounds like you had a “sale” in 2013. A Form 1099-A doesn’t generate cancelled debt. So maybe there shouldn’t have been a 2013 Form 982. But you would report the 1099-C for 2015. You might have to amend 2013 as well. That’s the type of tax return I handle. So keep me in mind please if you decide not to self prepare. Hope that helped.
Hi Gary
I appreciate your expertise. I received a 1099-A today. Box 1 7-21-15 box 2 $237,462. Box 4$240,200. This was my home not a rental investment. The house sold just recently for $230,000. Do I report this form with my taxes? What wil I be responsible for? Any help, helps.
Thank you,
Robyn
Hi Robyn. Yes you’d report it but, probably, have no tax consequences from it.
Hi Gary,
We did a Chap 7 BK in 2012 and did not reaffirm the mortgages on our primary residence condo. We tried to modify with the banks with no success and then tried to short sale. We received many offers to purchase but the bank dragged their feet and never accepted any of them. They eventually foreclosed in Jan 2015. We just received a 1099-A. Box 2 has $188.562, Box 4 has $0, Box % is checked. What do we do? Are we going to have to pay tax $188,562 and add this to our taxes? Not sure what to do or how proceed. Any advice would be greatly appreciated. Thank you.
Hi Gary,
We did a Chap 7 BK in 2012 and did not reaffirm the mortgages on our primary residence condo. We tried to modify with the banks with no success and then tried to short sale. We received many offers to purchase but the bank dragged their feet and never accepted any of them. They eventually foreclosed in Jan 2015. We just received a 1099-A. Box 2 has $188.562, Box 4 has $0, Box 5 is checked. What do we do? Are we going to have to pay tax $188,562 and add this to our taxes? Not sure what to do or how proceed. Any advice would be greatly appreciated. Thank you.
Hi Susanne it sounds like you’d report a sale of that property in 2015. So you wouldn’t pay tax on the entire amount in Box 2. If it qualifies as your primary residence you probably wouldn’t have any tax consequences except for reporting on the 2015 return. Hope that helps.
Thank you so much for the response.
My house was foreclosed on in 2014. I received a 1099A last year after I filed, so it was not on my return. The FMV was higher than the amount left owing. I have not received a 1099C. How long do I have to amend last years return and include the 1099A?
The only restriction on amending is that you lose any refund after three years. Hope that helps.
Hello Gary
A question about a foreclosure we had in 2015, It was our primary residence with a VA loan, we received a 1099A with Box 2 principal balance $274,485 and Box 4 FMV 170,000. and box 5 Checked. The auction sale price was 145000. First Do I have to report this when filing since I did not receive a 1099C and if I do what amount do I use FMV or actual auction price?
Thanks
Hi Rick. Yes you’d report it. I do sometimes use a different FMV if it helps the client and the IRS might honor it. Hope that helped.
Hi Gary,
I did a voluntary deed in lieu on a rental property and got a 1099a last year. My CPA filed showing the house was disposed of. The FMV was $55,000 and the balance owed was roughly $48,000. I found out the house sold for $27,500. I originally paid $62,000 with a $6,000 down. My question since the 1099a filed, if I get a 1099c later, is my tax liability done?
Sadly no Duane. The hallmark of a good rental real estate CPA is discussing potential future tax consequennces.
Gary,
I just received a 1099-c on 2015 but purchase the vacant lot back on 2006. Made payments until 2008. Bought lot for $200K the box 2 is $179K. Could I just file a schedule D for the difference of 200 - 179 showing a loss of $21k and carry the loss? BTW the Box 1 date is 1/22/15 but county records show cancelled deed on 5/21/15.
Yes you’d file Schedule D for the sale. But you still have to deal with the 1099-C. I’d be happy to prepare that return for you.
Hi Gary, great site!
We are Michigan residents and deed in lieu on Alabama rental property closed December 2015. Full deficiency waiver from bank. Received 1099-C yesterday, it is showing box 2 debt discharged $81,675.60, box 7 FMV $175,000. Tax advisor suggesting the full amount of the loan forgiven would be considered the “sale price”; less cost basis of property would be the taxable gain. Does this make sense to you? Doesn’t feel right to me because we are basically disregarding the values on 1099-C.
Hi Dave. The sales price would be $175,000. No worries, hope that helped.
Gary,
I was discharged in 2010 from ch.7 BK. I just received a 1099-A for a RENTAL property that was wrapped in the BK. The box 2 reads $275,000 and box 4 $445,000.00. The bank bought it back at courthouse in Dec 2015 for $356,000. The house is now under contract for $220,000 from the bank to a buyer. no home in the neighborhood has sold for more than $390,000 in the past 8 years.
Q-If the FMV seems way to too high, can I have an appraisal done to contest? How can I get the number back to reality?
Q-Do I owe taxes on the difference between the loan amount of $275,000 and FMV if I had been discharged from Ch.7 before I stopped making the house payments?
Thank you!
Hi Chris. Well the bank is next transaction after your purchase so I think the $356 is valid. Public records should provide proof of that.
Just received 1099-A today
Box 2: $310, 786
Box 4: $487,477
Property sold last year at auction $477,825
No surplus or deficiency
What does that mean?
Hi Elmer. It means you have to claim the Form 1099-A on Schedule D or Form 4794.
We filed chapter 7 bankruptcy in 2013 and was discharged in june 2014. We had a rental property we didnt reaffirm. It was foreclosed on and sold June 2015. We have now been sent a 1099-C for $40,886.00 from Freddie Mac that we would have to claim as income. Are we responsible for that since we didnt reaffirm the debt.
Yes, you’d report the 1099-C on your tax return to show the IRS it’s been dealt with.
Received a 1099A for my primary residence since it was for closed on. I have contacted the bank and I will not be receiving a 1099C, since it was my PR then I don’t need to put this on my return correct?
Hi Joelle. You’d report it but (probably) won’t have any tax on it.
Hi Gary,We received a 1099 a on a foreclosure says we owed 65,000 fmv 24,999.I took it to a CPA and they said the 24,999 would be added in as income and now having to pay in.The box responsible for debt is checked.Does this sound right?
No, not on the basis of your comment Lynn.
Hi Gary,
I just received a 1099c for a forclosure that happened 14 yrs ago. I was reading that they had only 36 months to try to collect then the following yr would have to send me the 1099c. Is this correct and does the 36 months start when the first bank forclosed or when the last collection company contacted us?
Janice
Hi Janice it does sound like you can invoke the statue of limitation.
Thank you, I could kiss you. Do I go by the date of the forclosure, the date the bank last tried to contact me or the last date the collections company that they sold my loan to for a penny tried to contact me?
Latest date for the collection company. No worries.
Hi..I received 1099a in 2014 which my tax preparer/accountant filed with 4797 gain/loss..debt was 98k,fmv was 60k and so difference was 38 k which he entered as canceled debt income (line 21) from my 2014 tax return..now I received 1099 c which i assume I need to file for 2015 tax return..so does he have to enter it again as canceled debt income this year which could be taxable?
I forgot to mention that it was a rental property..thanks in advance for ur reply…
Your tax preparer would know best. But yes the 2015 1099-C is a 2015 reportable transaction.
Hi We had a rental property that was own by bonds we only paid the interest we never paid down the debt my husband got sick and we lost the house she resold the house she sold our bond do we have to put that on our tax return . i didn’t know i put he debt on my 2011 return she never sent any docs to me so how do i remove it from my return Do i do amended return Thank you
Sorry Elizabeth, I don’t understand the question.