1099A - I will try again

[JON]

Divorced 2005. As part of the divorce husband(ex) to keep house and get her off the mortgage. She ends up buying a small house with her settlement - $250,000, no mortgage. The husband cannot get her off and a few years later you guessed it he stops paying the mortgage in January, 2009. In May, 2009 she notices a couple of thousand she had in her savings account disappeared. Savings account and old mortgage were at the same bank. Information forwarded to her then that they are coming after her for payment. Goes to lawyer and he says file bankruptcy - house is exempt and protected to $300,000. He says she has a case, but the chances of winning would be 50% at best and attorney costs are not cheap.

She files Chapter 7 in July of 2009. The X husband lives in house (not paying mortgage) until September, 2010 when it is sold. My client gets 1099A in 2010 showing Balance of mortgage $163,706.73 and FMV of $812,706.73 and personally guaranteed. In my tax software bankruptcy is not an exception for 1099A??????? She has not lived there for 2 of the last 5??? She does not have a basis (does she) divorce.

If this was a 1099C bankruptcy is an exception. Insolvency does not work because of house owned clear.

How does she get out of it. Have you ever tried to talk to Well Fargo and convince them that it should issue a 1099C not 1099A. I am not even sure it should be.

HELP!!!!!!

[Lion]

Due to divorce

I haven't had one of these in a long time, but isn't there something about it still qualifying as her personal residence for the exclusion due to sale if her ex lived there and she didn't incident to a divorce? I'd read through the code itself.

[Jesse]

I haven't had one of these in a long time, but isn't there something about it still qualifying as her personal residence for the exclusion due to sale if her ex lived there and she didn't incident to a divorce? I'd read through the code itself.

I believe this is correct.

If her name was still on the loan the issuance of a 1099A or 1099C probably is correct.

I had a similar situation with the personally liable box checked on the 1099A - bank sold the property so I thought the taxpayer might receive the 1099C in the year of sale. The bank did call me to tell me that a 1099C would not be issued because the taxpayer was not personally liable!