Rental property

[bekzm]

October 15 is around the corner and problems still happen. Client has several rental properties. Have 1 property that they purchased in 2002 through a guy that carried the
note. August client got behind so the seller took the property back. Now - no 1099 A or 1099-C he just took it back. The property was set up for $25k - insured it for $75k. The amount still owed I see that is $74,000. Without any 1099's - what do I do since he carried the note and took it back. Got to get it off the tax return. Show it a sale of $74,000 and the expense is hardly anything. Adj basis 20k but FMV is 80K. So use the 20K or 80K. Any suggestion.
Thanks

[JG EA]

See Page 5 of Pub 544

If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. The foreclosure or repossession is treated as a sale or exchange from which you may realize gain or loss. This is true even if you voluntarily return the property to the lender. You also may realize ordinary income from cancellation of debt if the loan balance is more than the fair market value of the property.

Buyer's (borrower's) gain or loss. You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale or exchange. The gain or loss is the difference between your adjusted basis in the transferred property and the amount realized. See Gain or Loss From Sales and Exchanges, earlier.

You can use Table 1-2 to figure your gain or loss from a foreclosure or repossession.

As for the sale part of it you use the original purchase price as your basis + improvements like a normal sale.

[bekzm]

Thanks

I'm so happy that you answered what I was wanting to know. It is what I have been reading but sometimes just need that boost and confirmation that your on the right track. Thanks again.