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Guest

Jerry,

I just read your response to Liss' question. I have a similar situation, however, the property was a rental. The amount owed is less than the FMV. Do we have to file taxes on this, if so, how is it reported? I have been all over the internet to figure out how to file it but there isn't anything clear as to how. Can you help?

jenkin7 · Posted: Mon Feb 22, 2010 12:45 am Post subject:

Hi Guest,

If you've been sent a 1099A form by your lender and the outstanding debt has been cancelled, you need to report it to the IRS. You can claim exemption from taxes under Mortgage Forgiveness Debt Relief Act if you used the property as primary residence. Since it was a rental property, the debt relief act will not apply in this situation. However, you've mentioned that the amount owed is less than the fair market value (FMV), right? Well, in that case, you do not have any income due to cancellation of debts and thus, you need not report it to the IRS.

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