1099-s

[LARRYBOY]

I have someone that sold rental property, for the selling price do I put the amount in from the 1099-s or subtract the closing costs, etc. The 1099-s has $140,000 on it, the settlement statment has $91,262.

[ATSMAN]

When I helped a closing attorney or escrow agent to issue 1099-S the amount is the gross proceeds of the sale NOT after deduction of closing costs etc. They can use the HUD1 ststement to figure out their separate closing costs, taxes etc to adjust basis.

[BP.]

TTB has provided a great chart on p. 6-2 to help sort these things out.

[Burke]

Excellent chart. As you can see, you must have the HUD-1 to determine what the $91,262 consists of. Not everything is always treated the same. For instance, no mortgage payoff is considered at all on the cost calculation. You add the eligible expenses to the seller to cost basis when reporting the sale on Sche D. Sales price is the amt reported on the 1099-S. Same procedure applies to any type of sale reported on Sche D.

[LARRYBOY]

Mortgage payoff

Excellent chart. As you can see, you must have the HUD-1 to determine what the $91,262 consists of. Not everything is always treated the same. For instance, no mortgage payoff is considered at all on the cost calculation. You add the eligible expenses to the seller to cost basis when reporting the sale on Sche D. Sales price is the amt reported on the 1099-S. Same procedure applies to any type of sale reported on Sche D.

So this HUD-1 statement has a MTG payoff of $38,648.92, is that added back to the $91,262? Sorry you lost me, I didnt find that on the chart.

[Bees Knees]

So this HUD-1 statement has a MTG payoff of $38,648.92, is that added back to the $91,262?

The mortgage payoff isn't added back to anything. It is a non-issue as it has no tax consequence.

What everyone is trying to explain is that you have two numbers to report on the tax return:

1) The gross sales price - which is the amount reported on your 1099-S.

2) The cost basis - which is the original purchase price + closing costs from the original purchase that are added to basis + improvements + closing costs from the sale that are added to basis.

Closing costs that can be added to basis are listed on page 6-2 of TTB. Mortgage payoff is one of those costs that cannot be added to basis. Real estate taxes are another cost that cannot be added to basis (except for back taxes paid for by the buyer). Insurance escrow and mortgatge interest escrow are other costs that cannot be added to basis. In fact, you will find most of the closing costs from the HUD-1 statement cannot be added to basis.

[TAX4US]

What would be the correct way for reporting a sale on the 8949 or the D where a 1099-s is received? Brain hiccuped and lost or communication.

[Burke]

So this HUD-1 statement has a MTG payoff of $38,648.92, is that added back to the $91,262? Sorry you lost me, I didnt find that on the chart.

The above answers have explained it pretty well. It occurred to me after re-reading your post that the $91,262 may be the net proceeds which the seller actually received in cash. I originally thought that figure was the total of the closing costs. You just said "the figure on the settlement statement." Also, make sure you have the HUD-1 and not just the "Estimate of Closing Costs" many buyers/sellers are given. For the seller, most of the expenses listed in the right-hand column on page 2 would be legitimate expenses he can add to his basis. See the chart in TTB. His basis, of course, would be cost + improvements - depreciation taken + expenses of sale. Then you must figure the amt of gain that is attributable to depreciation for 1250 gain. Have you done one of these before?

[Burke]

What would be the correct way for reporting a sale on the 8949 or the D where a 1099-s is received? Brain hiccuped and lost or communication.

Same procedure as if you received a 1099B, cost basis not reported to IRS.

[MRPLOW]

I have someone that sold rental property, for the selling price do I put the amount in from the 1099-s or subtract the closing costs, etc. The 1099-s has $140,000 on it, the settlement statment has $91,262.

LARRYBOY, I would love to help you on this, but I really think your in over your head on this return, if your asking this question.

There is all sorts of issues with the sale of rental property: basis, depreciation recapture, land value, expenses of sale, HUD-1 statement.

[LARRYBOY]

No have not done one

On the right hand side I have Contract sales price-$140,000, Adjustments for items paid by seller: Taxes-$175.48, heating oil-$209.40. Gross amount due to seller: $140,384.88. Reductions in amount due to seller: Settlement charges: $7,473.90, Payoff 1st mtg ln:$38648, deposit held by broker: $3,000. Total reductions amount due seller: $49,122. Gross amount due to seller: $140,384.88 Less reductions in amount due seller: ($49,122) Cash to seller: $91,262

[Burke]

For rental property, you are going to have to do Form 4797. See TTB 6-13 & 14 and/or IRS Pub and instructions for that form. In addition, you have to have the depreciation schedule which shows how much he has taken in the past, and what his remaining basis is. You will need the land value (make sure he did not include that in the original depreciation set-up.) Some of these expenses (i.e, taxes and heating oil, for instance) will go on the Sche E, assuming he didn't sell it on 1/1/2013. You have to review Page 2 to determine what the $7,473.90 consists of. See TTB chart for eligible expenses due to cost of sale. Hope this wasn't a foreclosure.

[LARRYBOY]

Trying

Just trying to learn...

[LARRYBOY]

done

Ok, thanks for everyone trying to help me, I dont want anyone else to reply to tell me what to do. I am just going to say i have the depreciation schedules, Sche E, form 4797 and form D done. Just trying to figure out if I have the right amounts in place. I am looking in the tax book chart, however I am confused on the amounts/what #'s to use.

Thanks again for trying.

[Burke]

I just sent you a Private Message. Click on Notifications at the top of the Forum page.