Discussion Archives:Form 1099-C from a foreclosure

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Discussion Forum Index --> Advanced Tax Questions --> Form 1099-C from a foreclosure


Discussion Forum Index --> Tax Questions --> Form 1099-C from a foreclosure

AccTaxMan (talk|edits) said:

1 August 2012
Taxpayer's rental property was foreclosed in 2011. He received a Form 1099-C from the lender. How should the amount of debt cancellation be accounted for in the tax return?

Form 1099-C Box 2 "Amount of debt cancelled" is $100,000 Form 1099-C Box 7 "Fair market value of property" is $80,000 Adjusted basis of property $150,000

We report the $100,000 as income on line 21 Form 1040.

We report the foreclosure on Form 4797 as a sale of the property to the lender. We use the $80,000 as the selling price. With an adjusted basis of $150,000, we have a loss of $70,000.

So the taxpayer ends up having a net income of $30,000 ($100,000 - $70,000).

This does not seem right to me. Now I am wondering if the $100,000 should be reported on line 21. It seems to me reporting both the $100,000 debt cancellation and the $80,000 FMV is redundant. Please share your opinion.

AccTaxMan (talk|edits) said:

1 August 2012
Taxpayer's rental property was foreclosed in 2011. He received a Form 1099-C from the lender. How should the amount of debt cancellation be accounted for in the tax return?

Form 1099-C Box 2 "Amount of debt cancelled" is $100,000. Form 1099-C Box 7 "Fair market value of property" is $80,000. Adjusted basis of property $150,000

We report the $100,000 as income on line 21 Form 1040.

We report the foreclosure on Form 4797 as a sale of the property to the lender. We use the $80,000 as the selling price. With an adjusted basis of $150,000, we have a loss of $70,000. So the taxpayer ends up having a net income of $30,000 ($100,000 - $70,000).

This does not seem right to me. Now I am wondering if the $100,000 should be reported on line 21. It seems to me reporting both the $100,000 debt cancellation and the $80,000 FMV is redundant. Please share your opinion.

Ckenefick (talk|edits) said:

2 August 2012
My dear fellow,

let me refer you,

to the box,

that is yellow <<<<<<<<<

DaveFogel (talk|edits) said:

2 August 2012
There are literally hundreds of posts on this topic. I suggest that you start your search on the Foreclosures, Short Sales, COD Income Recap Page:

http://www.taxalmanac.org/index.php/Category:Foreclosures

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