Headache - Am I thinking right?

[dkss]

Hey all

I have had a headache all week! My brain is not firing on all cylinders - please help.

Situation:
Client has a 1099-A for a rental prop.
Box 2 $52423.59
Box 4 $30000.00
Box 5 yes

Is my brain thinking of the right solution?
Original cost = $53700, deprec allowed = $9620
"sale" reported on form 4797 showing a "sales" price of $30,000 and a loss of 14080?

No 1099-c issued yet - will let client know of possible future debt forgiveness income.

Counting the days.....

Thanks for any input

[dkss]

bump

Thought I would bump this one time. Please - any help?

[erchess]

I wish I could help

I am following this with interest. It may be that if I saw a 1099A I would recognize it but I am drawing a blank at this point so I have no idea what its various boxes are all about.

[dkss]

1099a

Thanks for your interest Erchess!
A 1099-A is a form for "Acquisition or Abandonment of secured property"
Box 2 "Balance of principle Outstanding" = $52,423.59
Box 4 "Fair market value of property" = $30,000.00
Box 5 "was borrower personally liable for repayment of debt?" = yes

Thanks
Deb

[ChEAr$]

With a basis

Thanks for your interest Erchess!
A 1099-A is a form for "Acquisition or Abandonment of secured property"
Box 2 "Balance of principle Outstanding" = $52,423.59
Box 4 "Fair market value of property" = $30,000.00
Box 5 "was borrower personally liable for repayment of debt?" = yes

Thanks
Deb

of about 43,000, looks like there's taxable income here, since he "sold" the
property for the balance of 52423.

And although I haven't delved into the mortgage forgiveness provisions, doesn't
that pertain only to personal and primary residences?

[dkss]

Natp

I found this Q & A on the NATP website:
Q: I received a Form 1099-A, Acquisition or Abandonment of Property. What do I do with it?
A: Receipt of Form 1099-A means you owed a lender some money and they have taken the identified property in satisfaction of some or all of the debt. For tax purposes, you are deemed to have “sold” the property to the lender and should report the “sale” according to the normal rules (Form 4797 for business or rental property, Schedule D for personal use property, etc.). You may have a taxable gain, or if business use property, a deductible loss.
To determine the “sales price”, you must look at Box 5 of the Form 1099-A. If Box 5 is marked “Yes”, you are personally liable for the debt and your “sale price” is the smaller of Box 2, Debt Outstanding”, or Box 4, Fair Market Value of the property taken. If Box 4 is the smaller amount, you still owe the difference between Box 2 and Box 4. You will eventually have to pay this difference unless it is later forgiven (which triggers debt forgiveness income).

If Box 5 of Form 1099-A is marked “No”, you are not personally liable for the debt and your “sale price” is the amount shown in Box 2, Debt Outstanding. Any amount in Box 4 is ignored.


So according to this, I should have a loss on a form 4797 from my real world example - right??

Thanks

ps: there has been no 1099-c issued - no cancellation of debt.

[erchess]

I believe

that you will need a 4797 as you said. I also believe that since the company has not forgiven the debt they probably intend to collect the remainder of what is owed. That could change of course depending on the financial status of your client.

Thank you for the education I have received this day.

[ChEAr$]

What's the economic reality of this?

I found this Q & A on the NATP website:
Q: I received a Form 1099-A, Acquisition or Abandonment of Property. What do I do with it?
A: Receipt of Form 1099-A means you owed a lender some money and they have taken the identified property in satisfaction of some or all of the debt. For tax purposes, you are deemed to have “sold” the property to the lender and should report the “sale” according to the normal rules (Form 4797 for business or rental property, Schedule D for personal use property, etc.). You may have a taxable gain, or if business use property, a deductible loss.
To determine the “sales price”, you must look at Box 5 of the Form 1099-A. If Box 5 is marked “Yes”, you are personally liable for the debt and your “sale price” is the smaller of Box 2, Debt Outstanding”, or Box 4, Fair Market Value of the property taken. If Box 4 is the smaller amount, you still owe the difference between Box 2 and Box 4. You will eventually have to pay this difference unless it is later forgiven (which triggers debt forgiveness income).

If Box 5 of Form 1099-A is marked “No”, you are not personally liable for the debt and your “sale price” is the amount shown in Box 2, Debt Outstanding. Any amount in Box 4 is ignored.


So according to this, I should have a loss on a form 4797 from my real world example - right??

Thanks

ps: there has been no 1099-c issued - no cancellation of debt.

Here's a rental property, cost less accumulated depreciation is about 42,000 (thereabouts
as I remember), and bank takes it and calls it FMV of 30,000, so that generates an
automatic loss?

I'm sure a lot of rental property owners would love to have the bank bail them out AND
generate a taxable loss.

[Davc]

Here's a rental property, cost less accumulated depreciation is about 42,000 (thereabouts
as I remember), and bank takes it and calls it FMV of 30,000, so that generates an
automatic loss?

I'm sure a lot of rental property owners would love to have the bank bail them out AND
generate a taxable loss.

Keep in mind they still owe 22,439.59 that they must pay or eventually realize COD income on.

[Gary]

Dreading Next Year

because I have several clients that had rental properties repossessed this year.