Another 1099A Question

[thomtax]

Client was hurt in motorcycle accident and could not continue to work. With no income, he turned over house to finance company. He received a 1099A

Box 2: 69641.52
Box 4: 71600.00
Box 5: Checked

Since FMV exceeds the principal owed, is it even necessary to report. He owned and lived in home for over 5 years preceeding the event so qualifies for exclusion.

I cannot find anywhere in my software that would allow for entering the 1099A info. I would like to show that the 1099a was taken into consideration, but am not sure how to do so, even if it was not necessary. All the examples that I can find on Pub 4681 and other places seem to be for where the amount owed exceeds the FMV.

All thoughts appreciated.

LT

[TaxGuyBill]

Perhaps it's not required, I would report it.

Just like if a taxpayer receives a 1099-S for the sale of the home, I would think that the IRS will be 'looking for it' on the tax return. The 1099-A alerts the IRS to the 'sale', but the IRS doesn't know the 'sale' qualifies for the exclusion unless you tell them.

I would report it in the same manner as reporting a 1099-S (but I don't know how your software does it).

http://www.irs.gov/publications/p523/ar02.html#en_US_2013_publink1000200792

[David1980]

I agree with TaxGuyBill. A literal reading of the instructions / pub 523 indicate to not report it in this scenario, but I treat the 1099-A as-if it were a 1099-S and report it anyway. Most software has a worksheet or something to enter data on for the sale of a main home, ultimately it'll end up on 8949. A good idea to keep the homebuyer credit on the radar too - if they had the 2008 credit and were paying that back you could see a repayment. Remember that the credit received reduces basis to the extent not previously repaid. Only relevant if there was a credit though.

[thomtax]

Thanks fellows - you are confirming my feelings.

I have been single minded in my concerns about the 1099A. However,after backing off and looking at it, I would appreciate your thoughts on this.

He originally paid 75000 for home and the balance of principal in box 2 is 69642. So should I not show a loss on sched D of 5358, which would of course be limited to 3000. Or does the 1099A change things? As you can guess, this is the first 1099A I have seen where the value was more than balance outstanding.

KT

[Lion]

If this was his personal residence, he cannot show a loss, limited to zero. But, I too would show the "sale" since IRS has a 1099-A.

[thomtax]

Well - duh. I knew that but for some reason have let this 1099A mess with what little mind I have left.

Thanks,
LT

[Lion]

Happening a lot to me these last couple of weeks. Join the club!