1099-C & filed bankrupty, do you still have to reduce tax attributes?

[nwtaxlady]

My client received a 1099-C for $30,000 for a mortgage on a house he used to have years ago (before 2006). I never knew about this house until now. It was a house he had before he became my client in 2006. He said they filed bankruptcy and the house went thru the bankruptcy, which the 1099-C does indicate that in Box 6 with an A for Bankruptcy.

I have this on the Form 982 with 1a marked for discharge of indebtedness and the $30,000 on line 2 for the amount.

So my question is, do I have to go onto part II on the form to reduce tax attributes? And if so, which one? I was going to apply it to 10b, but that says only if you checked 1e and did not, because I marked 1a for bankruptcy.

Help, thank YOU!!

[nwtaxlady]

help....anyone?? I did some reading and...

So I did some reading.... and it looks like they do need to reduce tax attributes. It says to first reduce the basis of depreciable property. Well, my client doesn't have any depreciable property. Then it says to reduce NOL's well, my client doesn't have an NOL. and then it says to reduce basis of the home. Well, my client hasn't had that home since 2008. So do I reduce basis of his current personal residence or ??? Kinda lost here. Am I overlooking something?

[Roland Slugg]

Your confusion is understandable. The F-982 instructions are difficult to grasp.

If your client doesn't have any of the tax attributes listed in Part II ... and he probably doesn't ... then the only line that's relevant is line 10a. The amount to be entered there is the smallest of three possible amounts: (1) The basis in all his nondepreciable assets owned as of the day the debt was discharged, (2) the net amount by which he was solvent as of the day the debt was discharged, or (3) the amount entered on line 2.

Take a good look at that 1099-C form. Is it for the year 2016? If your client owned that house in 2006 and lost it in 2008, that's a long time for a bankruptcy proceeding to last ... at least eight years. The times/years you refer to don't seem to add up, so I'm wondering if there are missing facts.

[nwtaxlady]

Client filed chapter 13 bankruptcy.....

Client filed chapter 13 bankruptcy sometime around 2008-2009. Said it was bankruptcy that had to make payments to, so probably Chapter 13. In my research I read that can take up to 5 yrs. The 1099-C has a date in box 1. of 05/18/2016. Box 2. amount of debt discharged is $30,735.

Client has nothing..... nothing to reduce tax attributes. So first of all do I mark box 1a for discharge of indebtedness in a title 11 case?

They do own a home now, so do I reduce the basis of their current principal residence and put that on 10b or 10a? 10b said only put their if you check line 1e. 1e is discharge of qualified principal residence indebtedness. This was their principal residence back in 2008.

So do I mark box 1a for discharge of indebtedness in a title 11 case?
or do I mark 1e for discharge of qualified residence indebtedness?

Then do I reduce any tax attributes in Part II?

Thanks.