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1099-a Amabdonment Of Secured Property

Discuss anything to do with property law - buying, selling property

1099-a Amabdonment Of Secured Property

Postby Terry » Tue Nov 15, 2016 7:14 am

s About Taxes)/1099-A Amabdonment of Secured Property Advertisement Expert: Neil Johnson(The Tax Dude®) - 1/31/2008 I just received a 1099-A for the year of 2006, the lender said they sent it last year but did not have a forwarding address, Anyhow, I lived in the home from 1997 until March 2006 when forced to foreclose.  Box 2 shows the balance of principal outstanding $110,516.83, Box 4 shows the Fair Market Value of $120,000.00, Box 5 is checked YES the borrower was personally liable.  I do not know what to do with this at this point. I divorced in April of 2006 therefore I was married at the time of the foreclosure so why wouldn't he be as much liable? Please Help!
Terry
 
Posts: 47
Joined: Mon Jan 06, 2014 10:11 am

1099-a Amabdonment Of Secured Property

Postby Renzo » Fri Nov 18, 2016 10:17 pm

Gaila,

When you lose a home to foreclosure, the tax reporting is the same as if you sold your home.  The amount reflected in box 2 of the 1099-A(balance of outstanding principal) is technically your selling price.  To determine whether you have a gain or loss on the foreclosure, you need to take your "sales price" and subtract your basis.  Basis is your original purchase price, plus costs associated with the purchase(title insurance, legal fees, etc.), plus improvements, plus the costs of sale(realtor commissions, etc.).

If you have a loss on the sale(foreclosure), the loss is not deductible.  Losses from the sale of personal property are never deductible and personal residences are considered personal property.  If you have a gain, up to $250,000($500,000 if married filing a joint tax return) is excludable from tax.  That's the good news.  

Now, the bad news.  You should have also received a Form 1099-C from the lender.  Form 1099-C is used to report the cancellation of debt.  Historically, cancellation of debt was considered taxable income.  Recent legislation has excluded cancellation of debt from the acquisition of a primary residence as income, if the debt was cancelled between 1/1/07 and 12/31/09.  

Since your debt was cancelled during 2006, you will not be able to take advantage of this legislation.  It's very conceivable you will need to amend your 2006 tax returns to include the cancellation of debt as income.  There is one possible exception you may be able to employ.  If you can prove you were insolvent at the time the debt was cancelled, you may be able to avoid the tax on the debt cancellation.  This will be very difficult to prove to the IRS.

Regards,

Neil Johnson

The Tax Dude™

www.thetaxdude.com

[email protected]
Renzo
 
Posts: 37
Joined: Mon Jan 13, 2014 2:07 pm

1099-a Amabdonment Of Secured Property

Postby Fallamhain » Thu Dec 01, 2016 9:51 pm

s About Taxes)/1099-A Amabdonment of Secured Property Advertisement Expert: Neil Johnson(The Tax Dude®) - 1/31/2008 I just received a 1099-A for the year of 2006, the lender said they sent it last year but did not have a forwarding address, Anyhow, I lived in the home from 1997 until March 2006 when forced to foreclose.  Box 2 shows the balance of principal outstanding $110,516.83, Box 4 shows the Fair Market Value of $120,000.00, Box 5 is checked YES the borrower was personally liable.  I do not know what to do with this at this point. I divorced in April of 2006 therefore I was married at the time of the foreclosure so why wouldn't he be as much liable? Please Help!
Fallamhain
 
Posts: 47
Joined: Mon Jan 06, 2014 1:37 pm


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