I purchased a house in Fl. in 2005. It was a place for rental & investment since I do not live there. When things got really bad during the housing industry meltdown, I stopped paying the mortgage. The bank foreclosed the house in Dec. 2009. The bank sent me a 1099-A (Abandonment of Secured property). Box # 2 in the 1099-A is $166,100 (Balance of Principal outstanding); Box # 4 is $24,750 (Fair Market Value). The basis of the property is $174,900 (Purchase Value). The Abandoned property should be reported on Form 4797 (Rental/Investment Property). Box # 5 says that borrower is personally liable for repayment of debt. How do I determine the amount to be reported (Gain/Loss) on form 4797. I do believe that Income (gain) has to be reported. Any serious answer will be appreciated.....
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Foreclosure is really just a type of sale. The FMV listed on the 1099A is considered the sales price. So, you would report the sale of the property just as if it were a "regular" sale. Figure your basis as your original cost, plus improvements, minus depreciation, and any misc expenses that are deductible. This will determine the gain or loss. (in your case, a loss)
The mortgage company will probably send a 1099C for cancelled debt this year
(2010) or maybe even in 2011. The debt cancelled will have to be dealt with then.You have the right to remain silent. Anything you say will be misquoted, then used against you.
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