Satisfied Customers: 105
Experience: LL.M. (advanced law degree in Taxation) in International Taxation, Master's in Tax Degree Candidate
replied 5 years ago.
Thanks so much for giving me the opportunity to assist you with your question through JustAnswer. A 1099A is usually issued by a lender when real property is abandoned or surrendered back to the lender. (as in a default in payments and the owner turns the house back over to the lender. The 1099 A predates a 1099 C (debt forgiveness). The 1099A only tells the IRS that the house has been abandoned not that there is any debt forgiveness yet. Box 2 is the amount of the balance owed to the lender and box 4 indicated the fair market value of the property. At this point attach the 1099 A to your tax return when the return is sent in. If there is any additional forms that need to be sent the IRS will let you know. If later you receive a 1099 C you will have to attach it to your return in the year you receive it along with a Form 982. At the present if the property was you primary residence and mets the other requirements there will be no tax liability for the debt forgiveness by the lender. I hope this helps with your question. Please select "accepted" so that I can get credit for my reply to your question. Also, positive feedback is appreciated. Have a follow-up question, just ask. Good luck with your legal issue!
Satisfied Customers: 2075
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
replied 5 years ago.
I'm afraid I must disagree with the above expert. You should never just send a form to the IRS without showing any entries reported from it on your Federal 1040.
A 1099A forfeiture is reported in the same way a sale is.If the 1099A represents the the sale of your personal residence that was foreclosed on, the you report the sale on Form 1040 (Schedule
D) . using the $ amount in box 2 of the Form 1099A as the sales price, and your total cost in the property (including the original purchase price plus all of the improvements you made over the time you owned it ) as your basis. If this results in a gain on the sale, and this is your personal residence that you owned lived in it for at least 2 out of the 5 years prior to the foreclosure, then you may exclude up to $250,000 in gain ($500,00 if you file married filing jointly and both you and your spouse lived in the home as your principle residence for at least 2 out of the 5 year prior to the foreclosure.) Please see below:
I also want to give you the link below:
This link has a good worksheet for figuring both income from any cancellation of debt and whether or not there is a gain on the foreclosure, since foreclosures are considered to be the same as a sale of the property for tax purposes.
Since you stated that box 5 is checked yes, meaning you are personally liable for this debt, then if this foreclosure is NOT for your personal residence, you may have what is known as "cancellation/forgiveness of debt", and you should be receiving a 1099C showing how much of the original debt was canceled/forgiven and that will result in taxable income. Please be sure to do the top part of that worksheet I mentioned to see if there really will be any cancellation of debt (There might not be)
However,whether or not there is any cancellation of debt, you must still report the 1099A forfeiture notice as a sale. If this was rental property for example, then you would report the sale on 2009 Form 4797 Sales of Business Property (Also Involuntary Conversions and Recapture Amounts Under Sections 179 and 280F(B)(2)) and you would still follow the instructions in the link I provided above .
I hope this helps.
Edited by Anne on 5/15/2010 at 5:53 PM EST