1099-C woes

[appelman]

I have a client who lost 3 rental properties to foreclosure in 2010, all from the same lender. He received 1099-A's in 2010 listing loan balances, but no FMV's. Loan balances are all around 200K. Of the three, two have been sold for 149K and 190K, respectively, and one is still listed at 145K.

In 2011 he received the 1099-C's. FMV's are all listed between 270K and 300K (!), and amounts of debt cancelled are shown between 185K and 215K!

Something doesn't seem to make a lot of sense here. Am I missing something?

[JG EA]

I have a client who lost 3 rental properties to foreclosure in 2010, all from the same lender. He received 1099-A's in 2010 listing loan balances, but no FMV's. Loan balances are all around 200K. Of the three, two have been sold for 149K and 190K, respectively, and one is still listed at 145K.

In 2011 he received the 1099-C's. FMV's are all listed between 270K and 300K (!), and amounts of debt cancelled are shown between 185K and 215K!

Something doesn't seem to make a lot of sense here. Am I missing something?

So, you handled the "sale" in 2010 and now need to do the two 2011 1099C's? That does seem amazing that they would put the FMV higher than they got. I would say that is good for your client. You are right that it sounds odd. You could always ask why. I would be happy with that result, but I guess there is the chance they will correct it?

[David1980]

I have a client who lost 3 rental properties to foreclosure in 2010, all from the same lender. He received 1099-A's in 2010 listing loan balances, but no FMV's. Loan balances are all around 200K. Of the three, two have been sold for 149K and 190K, respectively, and one is still listed at 145K.

In 2011 he received the 1099-C's. FMV's are all listed between 270K and 300K (!), and amounts of debt cancelled are shown between 185K and 215K!

Something doesn't seem to make a lot of sense here. Am I missing something?

I agree. For example, let's say he bought one for $200k and the principal owed was $200k when they took it, if the bank showed $270k for FMV and $185K for debt cancelled that suggests the taxpayer owed $455k to the bank for the one property (that they originally paid $200k for). While the cancellation of debt can contain fines/penalties/interest etc... on top of the principal, it seems unlikely to have $255k of fines/penalties/interest. More likely the bank screwed up the 1099-C's. If the 1099-A was issued in 2010 I don't think they should even list FMV on the 1099-C from 2011, unless it's for different property.

So, what I'd do, is forget about the 1099-A's and 1099-C's. Find out what the real balance of the principal outstanding was and the break down of the debt owed the bank. That likely will involve the taxpayer requesting information from the bank...