I client of mine received two 1099A on the same property. One of them have a balance of $30000 with a fair market value of $93000. Would he have a taxable situation? I do need to ask if he had filed bankruptcy on the house. How would you prove insolvency otherwise?
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TTB, page 14-8 provides you with examples on how to handle foreclosures and repossessions.
As to insolvency issues, TTB, page 14-8 under Exceptions to Taxable Income From Discharge of Indebtedness it says:
"For purposes of IRC Section 108 the term "insolvent" is defined as the excess of liabilities over the FMV of assets immediately before the discharge."
You would prove this by doing a compilation for the taxpayer.
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