1099 A second home

[bekzm]

Help - have a 1099A on 2 different situations - same person. 1st one is a vacation ownership interest - the FMV is greater than the principal so do you report it on 4797? They could not upgrade to what association demanded so let them have it back. So loss or no loss
2nd one WAS a personal house - rented to son - took depreciation 3-4 years and son quit paying rent the last 4 years have not depreciation it due to she called the IRS and they told her not to claim it as rental - so went back to personal residence - vacate house. In 2007 they get a 1099A for FMV less than the box 2 - principal and a 1099 C for $20,372.55 but the FMV was $55000. So report it on the 4797 but what about the interest that they paid on which they have a stmt showing it and taxes and the depreciation? Does that add to basis?
Help

[solomon]

Help - have a 1099A on 2 different situations - same person. 1st one is a vacation ownership interest - the FMV is greater than the principal so do you report it on 4797? They could not upgrade to what association demanded so let them have it back. So loss or no loss
2nd one WAS a personal house - rented to son - took depreciation 3-4 years and son quit paying rent the last 4 years have not depreciation it due to she called the IRS and they told her not to claim it as rental - so went back to personal residence - vacate house. In 2007 they get a 1099A for FMV less than the box 2 - principal and a 1099 C for $20,372.55 but the FMV was $55000. So report it on the 4797 but what about the interest that they paid on which they have a stmt showing it and taxes and the depreciation? Does that add to basis?
Help

Second one first. If in fact the rental was converted back to a principal personal residence, then the 1099-C amount is not taxable and put on Form 982 and basis is reduced by that amount. However, the unrecaptured 1250 gain (depreciation) is not excluded from IRC 121.

Regard the first one, what do you mean by a vacation interest? Time share?

[bekzm]

Vacation Home

The description of the property is Vacation Ownership Interest - so I'm guessing yes the same as a time share - - vacation home. The association wanted them to upgrade the bedrooms which they didn't have the x-tra money at the time they wanted the improvements done - so they took over.
Thank you for responding - I was wondering since it was not the rental property and was going to recapture the depreciation but was not 100% sure. It is so overwhelming and you have helped alot. Thanks

[WhiteOleander]

My opinion.

1st house was not used for business so no 4797. The sale would be reported on Sch D. If there is a loss, it would be a personal loss. So no deduction.

On 2nd house, you say it went back to "personal residence-vacant house". How can it be a personal residence if it is vacant? They had to live in the house for 2 years to make it their residence.

[bekzm]

Personal/rental

The son lived there rent free - no payments what so ever. So does it classified as personal residence since it was the son living there the last 3-4 years - rent free, utiltiy free, insurance free, & tax free. Yes - he was living there but no payments
????? I have the 1099a & 1099c for it whcih says - yes liable for repayment on the A but report 4797 or Sch D
Amt of principal is $60,202.72 but the 1099C is $20,372.55 and FMV on both is $55,000

[solomon]

The son lived there rent free - no payments what so ever. So does it classified as personal residence since it was the son living there the last 3-4 years - rent free, utiltiy free, insurance free, & tax free. Yes - he was living there but no payments
????? I have the 1099a & 1099c for it whcih says - yes liable for repayment on the A but report 4797 or Sch D
Amt of principal is $60,202.72 but the 1099C is $20,372.55 and FMV on both is $55,000

If the son was living in number 2 rather than your client, then it is not the principal residence of your client. Therefore, there is no 121 exclusion nor forgiveness of the 1099-C - debt forgiveness is for one's principal residence only. If it was treated as a second home the last 4 years, then the 1099-A is reported on Sch D but any unrecaptured 1250 gain would be reported.

Assuming the vacation home was not rented, the sale is reported on Sch D as well. However, no loss would be permitted.