I've read all the publications and spoke with the IRS and still can't understand the logic behind the amt of the outstanding debt being used as the sales price to recognize a gain on the foreclosure of a property.
Why does the taxpayer have to recognize a gain in the year the 1099-A is received if they are still liable for the loan?
What happens when the bank finally sells the property for an amount lesser than the outstanding loan balance? If the taxpayer still has to pay this difference, then the amount from the 1099-A that he's already recognized a gain on, was an overstated selling price. If the bank forgives the balance and issues a 1099-C, then the taxpayer recognizes a gain on the cancelled debt.
If I have this right, isn't there alot of double dipping going on here? What am I missing? I see no references to this in any of the publications. It's as if paying the outstanding loan balance back at least in part makes no difference to any gain that had to be recognized back when the 1099-A was issued.
Please help if anyone can make sense of this for me.
Why does the taxpayer have to recognize a gain in the year the 1099-A is received if they are still liable for the loan?
What happens when the bank finally sells the property for an amount lesser than the outstanding loan balance? If the taxpayer still has to pay this difference, then the amount from the 1099-A that he's already recognized a gain on, was an overstated selling price. If the bank forgives the balance and issues a 1099-C, then the taxpayer recognizes a gain on the cancelled debt.
If I have this right, isn't there alot of double dipping going on here? What am I missing? I see no references to this in any of the publications. It's as if paying the outstanding loan balance back at least in part makes no difference to any gain that had to be recognized back when the 1099-A was issued.
Please help if anyone can make sense of this for me.
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