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    #16
    Originally posted by NotEasy View Post
    After you have used the information on the 1099-A to report the abandonment as a sale, do you still have to worry about the forgiveness of the outstanding loan as income?
    If there is no 1099C, then the lender has not frogiven the debt. They may continue collection attempts. They might forgive the debt in a later year. The income would have to be addressed in that year.
    Last edited by WhiteOleander; 03-07-2009, 09:19 PM.
    You have the right to remain silent. Anything you say will be misquoted, then used against you.

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      #17
      Originally posted by WhiteOleander View Post
      If there is no 1099C, then the lender has not frogiven the debt. They may continue collection attempts. They might forgive the debt in a later year. The income would have to be addressed in that year.
      Thank you for your reply.

      They did not send the taxpayer a 1099-C. But on the 1099-A that they sent to him, they did check 'no' to the question 'was borrower personally liable for repayment of the debt'. Does that mean a forgiverness of the loan?

      Comment

        #18
        Originally posted by NotEasy View Post
        Thank you for your reply.

        They did not send the taxpayer a 1099-C. But on the 1099-A that they sent to him, they did check 'no' to the question 'was borrower personally liable for repayment of the debt'. Does that mean a forgiverness of the loan?
        That means that they cannot go after the borrower for the unpaid balance of the debt. So, there will be no loan forgiveness to the borrower. So, no 1099C will be coming.
        You have the right to remain silent. Anything you say will be misquoted, then used against you.

        Comment

          #19
          Originally posted by WhiteOleander View Post
          If there is no 1099C, then the lender has not frogiven the debt. They may continue collection attempts. They might forgive the debt in a later year. The income would have to be addressed in that year.
          Do they normally do this when the property is actually sold?

          If the house sells for less than the debt the remainder is what would most likely be forgiven so the taxpayer will not know until the property is actually sold?

          With so many of these foreclosures it will be interesting to see how many of the 1099-A's lead to 1099-C's in future years. It's probably a good idea to warn these clients as well. I did not realize this could happen - more of the student in me!
          http://www.viagrabelgiquefr.com/

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            #20
            The amount listed in box 4 FMV is considered the sales price. That is the firgure that will be used to determine if the outstanding debt is satisfied or not. If not, then there could be COD if the t/p is personally liable for the debt.

            But, each state has different laws concerning how long the lender can wait to cancel the debt. In TX I believe it is 2 years. So, the lender might continue to try to collect for awhile. The t/p could get the 1099C several years after the foreclosure.
            You have the right to remain silent. Anything you say will be misquoted, then used against you.

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              #21
              Worth more than the loan, no COD it seems, but wait...

              Originally posted by WhiteOleander View Post
              The amount listed in box 4 FMV is considered the sales price. That is the firgure that will be used to determine if the outstanding debt is satisfied or not. If not, then there could be COD if the t/p is personally liable for the debt.

              But, each state has different laws concerning how long the lender can wait to cancel the debt. In TX I believe it is 2 years. So, the lender might continue to try to collect for awhile. The t/p could get the 1099C several years after the foreclosure.
              I started out thinking my situation was so clear and simple, easily explained and easily understood... geez! I never thought it would bring so much "chatter" (as I call it.) and that there will be so many other issues that will come up with all the foreclosures and abandonments in the near future. This will be a great thread for any issue that comes up.

              I have learned so much. Does the learning ever end with the tax business? I know it won't, and thanks again for the lessons.
              "I am proud to pay taxes in the United States. The only thing is I could be just as proud for half the money." Arthur Godfrey

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                #22
                Yes, I'd like to second everything Possi just said. I was working on my first one this past week with a 1099-a on a rental property and I was leaning toward handling it in a way that would have been incorrect. This thread cleared things up for me and also caused me to caution the client that this may not yet be over.
                "The only function of economic forecasting is to make astrology look respectful" - John Kenneth Galbraith

                Comment

                  #23
                  Originally posted by JohnH View Post
                  Yes, I'd like to second everything Possi just said. I was working on my first one this past week with a 1099-a on a rental property and I was leaning toward handling it in a way that would have been incorrect. This thread cleared things up for me and also caused me to caution the client that this may not yet be over.
                  Right. So, lets say the lender decides to forgive the debt in 2010. They will issue the 1099C in that tax year. There will be a date the debt was forgiven listed on the 1099C.

                  So, then you have to review the rules for excluding the debt from income. It might be qualified residential debt. No problem. Or, you might have to prove client insolvent. But, you would use the date on the 1099C to test for insolvency. Not the date that the property was foreclosed. The debt wasn't forgiven on the date of foreclosure. So, you have to get the financial info for the date it was forgiven.

                  Edited to add:
                  I had a client that had lost everything in a flood. He had defaulted on several credit cards because he just could not keep up any longer. I'm sure the CC companies sent 1099Cs. But he didn't get them because he had moved several times.

                  He got an IRS letter pertaining to COD debt income not reported. He was so shocked. We were able to prove him insolvent in the end, but he was in tears for awhile. Its really hard on the client sometimes.
                  Needless to say, the client gets very frustrated and sometimes angry. Sometimes they get a 1099C and they thought they were through with the nightmare of several years past. Sometimes we get yelled at.
                  Last edited by WhiteOleander; 03-08-2009, 02:53 PM.
                  You have the right to remain silent. Anything you say will be misquoted, then used against you.

                  Comment

                    #24
                    Originally posted by WhiteOleander View Post
                    Right. So, lets say the lender decides to forgive the debt in 2010. They will issue the 1099C in that tax year. There will be a date the debt was forgiven listed on the 1099C.
                    But if they have already checked 'no' to the question 'was borrower personally liable for repayment of the debt' on the 1099-A, they will not issue a 1099-C to the taxpayer under any circumstance in the future. Am I right?

                    Comment

                      #25
                      Originally posted by NotEasy View Post
                      But if they have already checked 'no' to the question 'was borrower personally liable for repayment of the debt' on the 1099-A, they will not issue a 1099-C to the taxpayer under any circumstance in the future. Am I right?
                      Yes, that is correct. And if my client did receive a 1099C related to this debt, I would send a copy of that 1099A to the IRS showing they aren't liable for the debt. And that should end it.

                      I say that because I have found there's really no way to know what the lending companies might do sometimes. They do the wrong thing and we have to fix it.
                      You have the right to remain silent. Anything you say will be misquoted, then used against you.

                      Comment

                        #26
                        In my case the taxpayer bought a rental property in his neigborhood in Jul 2007, collected rent for 8 months until the renter moved out, lost his job, fell behind on the loan, and then the rental property was foreclosed in Jun 2008. The "yes" box was checked, the loan balance was $170K and the FMV was $180K per the 1099-a. He drives by the property on a regular basis and says the lender has it boarded up, but with a "For Sale" sign in the yard. (I bet his neighbors love him).

                        He still owns his primary residence and a snapshot of his finances tells me he's not insolvent (not that it matters as this point since there's no 1099-c). However, I told him there may be more to this if a 1099-c comes through the transom in a year or so.
                        Last edited by JohnH; 03-08-2009, 03:27 PM.
                        "The only function of economic forecasting is to make astrology look respectful" - John Kenneth Galbraith

                        Comment

                          #27
                          Originally posted by JohnH View Post
                          In my case the taxpayer bought a rental property in his neigborhood in Jul 2007, collected rent for 8 months until the renter moved out, lost his job, fell behind on the loan, and then the rental property was foreclosed in Jun 2008. The "yes" box was checked, the loan balance was $170K and the FMV was $180K per the 1099-a. He drives by the property on a regular basis and says the lender has it boarded up, but with a "For Sale" sign in the yard. (I bet his neighbors love him).

                          He still owns his primary residence and a snapshot of his finances tells me he's not insolvent (not that it matters as this point since there's no 1099-c). However, I told him there may be more to this if a 1099-c comes through the transom in a year or so.
                          Well, it looks to me that it sold for 10,000 more than the loan balance. So, unless they accured unpaid interest or other costs that were not included in the loan balance on the 1099A, there is no debt forgiveness. The debt was satisfied by the sale.
                          You have the right to remain silent. Anything you say will be misquoted, then used against you.

                          Comment

                            #28
                            How do we know if it Forclosed or etc..

                            My ProSeries software is asking me if it foreclosed, loan mod, abandment, short sale, etc. Is the 1099-A suppose to disclose this and if so where at?

                            Comment

                              #29
                              Ask the client

                              Ask the client.

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