1099A Brother bought house, Sister lived in, Now foreclosed

[Jack the Tax Lady]

bought a car

What happened to the 100K brother took on the refinances.
Cost - 200K
Debt - 300K

He says that they only received $40,000 in the refinance and they bought a car with it. That's the main thing, I'm quite sure there were other things too, but nothing to improve the house. He said there were a lot of fees paid for the refi as well.

He doesn't have any idea why the principal balance is $300,000 when they refied for only $250,000

[JohnH]

And we have people wondering why there's a housing bubble & credit crisis...

[taxmom34]

i would think he should have reported sisters house as rental property , her payments to the bank would be his rental income. it would certainlly have simplified the situation.

[Jack the Tax Lady]

Then you are saying that there was no equity taken on the refinances?

No, I was answering the question about whether there was income received because there was a 1099. Of course they took equity out of the refinance, that's how they bought the car (from other answer)

He received a 1099A for abandonment, not another type of 1099 for income. Although, I realize he may have a realized gain that may be taxable, it is not strictly speaking income.

So, it does sound like there were some high refi costs taken out of the refi, but they still took about $40,000 or so to purchase a car, etc.

I really appreciate your suggestions, these are a real pain.

[solomon]

The brother probably would be wise to obtain representation.

[Jack the Tax Lady]

that may be true

The brother probably would be wise to obtain representation.

That may be true, and it is something I have considered.

Let's say you were representing him, how would you handle it?