Thankyou Albert for my last question!!-Am a tax-preparer-my client received a 1099-a-Dated:01-15-09--principal balance outstanding of $303,068 and a fair market value of $166,358---he is liable for the debt----lost the home in foreclosure---was reporting the income and expense on schE since 2005-about 30,000 in dep.--How would you report this on his return---has good job-no bankruptcuy and lives in Calif.
I've already tried...
Answers
Expert
You will report the sale of the property with the sales price of $166,358 and the purchase price of ???
You will have 2 different transactions as you must allocate the sale between the land and the building/improvements as well as recapture the depreciation.
If you had any suspended losses you will now be able to release them and deduct the remaining expenses.
The amount of debt forgiveness, which should be on Form 1099C, will be included as income on Line 21.
CFS Tax Tools has some great worksheets to calculate these types of situations. As a tax pro I highly recommend this software. Cost is $189 (no I don't get a referral fee) You may look them up at www.taxtools.com
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I've been assisting clients since 1971 and have also taught tax preparation at the Jr. College Level. I have a wealth of knowledge in the tax business over a 39 year period and do both personal and business returns. I use the best tax software in the business. We can also provide you with Qualified Retirement Plan set up & administration services. We prepare Forms 1040, 1065, 1120, 1120S & 1041. We are also QuickBooks Pro Advisors and can assist you with your QuickBooks issues or even initial setup of your files. We can also assist you with your life insurance needs in the state of CA. View Profile
It's difficult to comment on the loan not knowing where the property is located. CA is a non-recourse state, Lenders must allow 1 year for the owner to redeem the property before they can sell at auction before going after the owner for the difference between the loan balance and sales price. If the lender sells the property befire the 1 year period then the loan reverts to a non-recourse status.
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