1099-a

[Gary]

My client divorced her husband several years ago. He had not paid taxes for years. When they got divorced, he told her that he was taking her name off the mortgage but obviously didn't do so. He died a year or two ago, and now each of them received the 1099-A for identical amounts. Box 2 is 44248 and Box 4, fair market value is 164000. It is a non-recourse loan. There is no income from cancelation of debt. Could there still be capital gain if the basis is less than the fair market value? Does the property have to be sold first? Should she receive any of the selling price over the Box 2 amount?

I need help.

Gary

[JG EA]

Gary, each and everytime I have to go over the rules, because there are so many possibilities. This year I found TTB was a lot of help. They have the explanations and the government worksheet there that runs you through it. As for the sale part which is your question, don't forget the Sec 121 exclusion (or reduced exclusion) if it applies.

I have a question for you. Are you going to split the amounts to figure? I am struggling with that right now. But I'm thinking I will split because the IRS won't be looking for those particular figures will they since so much depends on the circumstances.

[Gary]

Split

Yes, I think it should be split. If there is no capital gain, is there anything that needs to be reported on the return? How does the IRS know that you have looked into the details and there is no tax due?

[JG EA]

I think even if there is no capital gain it should be reported - just like we'd report if a 1099S.

[WhiteOleander]

If there is a 1099A, the property has been sold. The Bank sold the home for the FMV listed. You do need the basis to decide if there is a gain or loss on the property. See if the T/P would qualify for the Sec 121 exclusion.

I don't see how you could just report half on your client's return if the 1099A is issued in their number. It would definately generate a letter later.

Not sure if there is a way to get your client off the cap gain if Sec 121 is not useful. I guess they should have made sure they were removed from the mortgage.

Here's a link to the IRS site for instructions to 1099A and 1099C.

http://www.irs.gov/pub/irs-pdf/i1099ac.pdf

[Gary]

Response from IRS

I thank you all for your input. I called the IRS, was transferred to the 1099-a person who was no help at all and transferred me to the schedule D person. After an hour, they took my information and said they would reply to my question via e-mail. This is the response I received.
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Our response to your tax law question appears below. For your reference, you can also research our website for general tax law topics at: www.irs.gov. Please do not use your "reply" button to respond to this message. This E-Mail address is non-returnable and will not accommodate replies because of current limitations to our system. More helpful information is provided at the end of this message.


This 1099A is for a foreclosure of your personal home that was not used for business purposes,then we can continue:Box 2 is the sales price that is reported on SCH D,the date of sales is box 1 of 1099A,the date you bought the house is the acquired date,the cost is the adjusted basis.If there is a loss whether it be long or short term does not matter because you can not take a loss on personal property.Therefore put a ZERO on column F of SCH D.If there is a gain,long term,you will be able to exclude if you meet the sale of home exclusion using section 121 per Pub 523.



Your question was taken over the telephone and it was either highly abbreviated or somewhat unclear. In this case, the transcribed question would not be meaningful to you. For this reason and because we were unable to provide an answer by telephone as planned, your question has not been included in our response.


This answer is based on our understanding of the facts you presented in your question. Omission of facts may affect the answer provided.

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EMPLOYEE ID: 43-16441 Mr. Lim Tel.800)829-1040 msg#: 3159623
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First note that they did not answer my question. What they gave me was a tutorial about the 1099-A. Also note that they state

"Box 2 is the sales price that is reported on SCH D"

They don't even know what they are talking about. These are the people we are dealing with. I am really frustrated.

Thanks. i just needed to get that off my chest. I still don't know what to do.

Gary

[David1980]

If there is a 1099A, the property has been sold.

You know, I have seen this but can't find anything showing why.

Form instructions indicate

File Form 1099-A, Acquisition or Abandonment of Secured Property, for each borrower if you lend money in connection with your trade or business and, in full or partial satisfaction of the debt, you acquire an interest in property that is security for the debt, or you have reason to know that the property has been abandoned. You need not be in the business of lending money to be subject to this reporting requirement.

Nothing about having had sold the property, just that it's abandoned. So it seems that a lender could take the property and then hold it without selling and still be required to file Form 1099-A.