I have a client with four rental properties, all of which he is about to lose due to non payment (no renters and no prospects of future renters). Whether or not he chooses the deed in lieu of foreclosure or just plain jane foreclosure, I am thinking that the final sales price and the amount reported on the 1099A will be less than what my client owes creating taxable income--these homes are located in a depressed area.
Example of one of his properties: Bought 07/05/2006 for $140,000. Probably will sell at foreclosure for $120,000 and he owes $140,000 (interest only loan).
If this occurs, what would be the amount of sale reported on the form 4797 to figure gain or loss on these rental properties?
If the amount to report is the final sales price, the result will be a loss. Do I then report the 1099A taxable income as other income? Also, a side note, the taxpayer would be insolvent at the time of sale of these rental properties.
I'm confused, but I know this is a simple fix. I think my brain turns into mush after the busy season. Sorry for the long post.
TIA
Example of one of his properties: Bought 07/05/2006 for $140,000. Probably will sell at foreclosure for $120,000 and he owes $140,000 (interest only loan).
If this occurs, what would be the amount of sale reported on the form 4797 to figure gain or loss on these rental properties?
If the amount to report is the final sales price, the result will be a loss. Do I then report the 1099A taxable income as other income? Also, a side note, the taxpayer would be insolvent at the time of sale of these rental properties.
I'm confused, but I know this is a simple fix. I think my brain turns into mush after the busy season. Sorry for the long post.
TIA
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