Client received a 1099A from the foreclosure of her personal residence. She declared bankruptcy previously (chapter 7). Box 2, "Balance of principal outstanding is $208,000." Box 4, FMV is $216,850. Is any reporting required? She was personally liable for the repayment of the debt.
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Last edited by zeros; 02-25-2012, 11:34 AM. -
Chapter 11 is the only one for bankruptcy? If she really owed only 208k (I say this because I forgot to add correctly before) she would be fine.Originally posted by zeros View Post
I would report it on D showing her basis. Their probably won't be a 1099C?
I know I'm questioning my replies. This is an area I feel very nervous about for some reason. I've had situations just like this and even called NATP but it seems too good to be true that there is nothing taxable.Last edited by JG EA; 02-25-2012, 12:44 PM.JG -
I think the form 1099-A is used to determine any taxable gain from the sale and is reported on Sch D and form 8949.
The selling price is the outstanding balance of the loan.
The basis is what it is.
The FMV is irrelevant.
Sec. 121 (see code "H" on the form 8949) can apply if the transaction shows a gain. If so, the gain is an adjustment on form 8949.
If the transaction shows a nondeductible loss or a nontaxable gain, I'm not at all sure whether the 1099-A needs to be reported at all. I have been reporting 1099-A whether there is any tax effect or not. So far, any gains on returns I've prepared have been excluded due to 121.
I might not be doing this correctly, but there doesn't seem to be any consensus.
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Entries on Form 982?
Does there need to be any entries on the 982 form? Just on schedule D?Comment
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It is my understanding that the sales price is the lower of the FMV or outstanding balance reported on the 1099A.You have the right to remain silent. Anything you say will be misquoted, then used against you.Comment
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The 982 would be used to report canceled debt. So if all you have received is a 1099A, you do not use the 982.Originally posted by zeros View PostYou have the right to remain silent. Anything you say will be misquoted, then used against you.Comment
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Yes, for recourse debt (Box 5 checked on 1099-A.) Nice little chart on TTB 14-12.Originally posted by WhiteOleander View PostComment
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My bad. AZ is a nonrecourse state for acquistion debt and I haven't seen any recourse debt listed on the 1099-A yet.
Sorry about that.Comment
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I used to get mixed up by this. Title 11 is the bankruptcy title. Chapter 11, as well as Chapter 7, Chapter 13, etc. are all parts of Title 11, so they're all good.Originally posted by JG EA View PostComment
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Final Word? 1099A
I'm thinking, based on the replies given, that I should report the gain on schedule D and take the section 121 exclusion for no taxable gain. Don't want the client to get a big bill two years from now.
Any final word?Comment
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This is how I treat it and I always wonder...Originally posted by WhiteOleander View Post
IRS Publication 4681 table 1-1 part 2 covers the calculation. You use the smaller of FMV or "Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property."
But what exactly does that mean? One way a 1099-C can differ from a 1099-A is that the 1099-A reports the balance of principal outstanding while 1099-C reports Amount of debt discharged.
Debt can include interest, fees, penalties, administrative costs, and fines - in addition to principal. So going back to the 4681 table and the scenario here, let's say the balance of principal outstanding is $208,000 and there is unpaid interest, fees, administrative costs, and fines of $8,000 (keeping the total below the FMV of $216,850).
Would you use $208,000 for the selling price or would you use $216,000 for the selling price?
What if the interest, fees, penalties, administrative costs and fines amounted to $20,000. Would the bank issue a 1099-C for $11,150 for those non-principal debts?Comment
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