1099-A, rental property and bankruptcy

[POCAHONTAS]

client purchased a rental in 2007, went in to foreclosure in 2009 and received a 1099-A, he is planning on filing bankruptcy, so should I wait for him to file bankruptcy and then file his 2009 tax return, so that the rental is included and discharged or what should I do.

thank you

[POCAHONTAS]

ok so I had the client take the 1099-A to the attorney and the attorney told him don't worry about the 1099-A he will not be taxed on it, so what do I do now any help will be appreciated
thank you

[POCAHONTAS]

so I had a feeling that we should not file his tax return before the bankruptcy goes through, and had him talk to his attorney again and I was right the attorney told him not to file his tax return until the bankruptcy is complete.

But I still have the problem on the tax treatment of his 1099-A because it is a rental property.

[Auto]

same problem

My client received a 2010 1099-A. Court proceedings in 2010 state client will still be liable for the loan so we don't expect to receive a 1099-C. Bankruptcy attorney telling client to just ignore the 1099-A. I don't believe the IRS will be ignoring the 1099-A issued for 2010 with bankruptcy proceedings commencing in 2011.

Also, the IRS informs me that their computers will pick up Box 2, Balance of Loan, as the sale price of the property as if it were sold. The client will be showing a huge gain as the Balance of the Loan far exceeds the basis of the property. And he hasn't and won't be forgiven on the loan.

I believe we have the same problem so I'm hoping you don't mind me adding to your question.

[peggysioux]

Same Problem

Auto and Pocahontas - did either of you determine the correct handling of your situations as I have a similar situation and hoping to get clarification. My client's attorney advised her that rental was included in bankruptcy and taxpayer would be free of any debt relating to the rental; however, rental went back to bank prior to bankruptcy. NATP research advised me that being property went back to bank prior to bankruptcy filing then property could not have been included in bankruptcy (makes sense to me); therefore, taxpayer is liable for capital gains and 4797 needs to be filed. So two different answers to same question.......any help would be greatly appreciated!!