1099A Acquisition or Abandonnent

[Granny]

I posted this thread on yesterday and have not received a response from anyone. I am new to the site and not quite sure if I posted correctly, so I am trying again.

My client received a 1099A. Box 2 shows 48904.00 and box 4 shows 69900.00. Box 5 shows that client is liable for repayment of debt. From reading the instructions for 1099A, it states that if box 4 is equal to or more than box 2 income from cancellation of debt is zero because the debt is fully satisfied and only the sale of the property is reported. I believe it would be reported on sch D if it was personal residence. However, the property is rental property. How would this be reported? Any help would be appreciated.


Thanks again,

Granny

[OldJack]

Granny I have never had your situation and I have not researched the subject. However, an apartment sale is normally reported on form 4797 instead of Sch-D.

Maybe someone else can address your specific question.

[Brad Imsdahl]

I agree, it is reported on Form 4797.

When property is re-possessed by the lender and sold to pay off the debt, the taxpayer reports it as a sale. Since the sale was greater than the outstanding debt, the first question you need to have answered is whether the taxpayer pocketed the difference, or whether the mortgage company pocketed the difference.

If the taxpayer never got a dime after the sale, the taxpayer is simply treated as selling the property for the amount of the debt that was owed. You would report that amount as gross sales proceeds, and then figure gain or loss accordingly on Form 4797.

If the taxpayer did receive cash in addition to having the debt paid off, the gross sales proceeds equals the debt paid off plus the cash received.

All other calculations on Form 4797 would be no different than a normal sale of rental property, with depreciation recapture and all that other good stuff.

[Granny]

1099A Acquisition or Abandonment

Brad, Thank you for you help. The taxpayer did not get any money. We have been seeing quite a few of these 1099A's or 1099C's here in Michigan.

Granny