I RECEIVED A 1099A AND IT SHOWS INCOME SO CAN I DEDUCT IT AS

lindaplus5 · Joined: 08 Feb 2008 Posts: 1 1.00 Dollars($)

iT SHOWS WHAT WE OWED AND WHAT THEY SAY WAS FAIR MARKET OR REALY WHAT IT SOLD FOR AT THE AUCTION. SO THE DIFFERENCE WOULD BE INCOME RIGHT? CAN I USE THAT AS A LOST ON MY INCOME TAX FOR MY HOME? NEED HELP

larry · Joined: 27 Jun 2007 Posts: 3328 474.49 Dollars($)

Hi lindaplus,

I think you should consult with a tax assessor.

BTW losses on acquisitions or abandonment of property which is held for personal use are not deductible.

Best of luck,
Larry

Samantha · Posted: Sat Feb 09, 2008 1:55 am Post subject: RE: tax on deficiency amount

Hi,

A tax assessor won't be the right person here. Instead, it has to be a tax advisor with whom you should consult if required.

The deficiency that is difference between the loan balance and the sale price should be paid off within a time period. In case you can't, it won't be taxed as per the Mortgage Debt Forgiveness Tax Relief Act . So, you need not worry about the taxes on the canceled debt.

Even if the form 1099A shows it as your income, that is, just for reporting to the IRS. You will have to file your taxes with the form 1099A and then you'll get a deduction on the whole.

Hope this helps...

God bless you.

Samantha

girlndebt · Joined: 02 Feb 2008 Posts: 11 5.69 Dollars($)

There are so many loopholes in this whole Mortgage Debt Forgiveness Tax Relief Act. It could be a blessing for most of us and for some it makes no difference. If money is tight, look for someone who can give you a free consult. Depending on your situation even if you do not qualify under the new law, you may be able to prove insolvency. I am not at all a tax expert. I have been researching this for months now. I sold my home through a short sale and my lender never sent me a 1099. I have been searching for answers but I will have to speak to a professional as well.

I usually file our taxes every year using TurboTax. This year though may be different. I see no forms on there that would pertain to these problems.

Best of luck to you.

jameshogg · Posted: Mon Feb 11, 2008 12:40 am Post subject:

girlndebt · Joined: 02 Feb 2008 Posts: 11 5.69 Dollars($)

The bill only applies to a “principal residence”. Investment properties and second homes in a short sale situation are not going to be eligible. So what does the IRS consider a "principal residence"? The answer is tricky. I know in my case, I lived in the house less than 5 years...actually less than 2. It was my primary residence and not a second home or investment property. Maybe it is just me and I am not getting it but when I called the IRS the other night, I had to go through a "worksheet" to figure this out. They calculated the months I lived there and then went over the reasoning I had to sell my house. Based on my answers, I was told to file a form claiming I was insolvent and I wont be responsible for the taxes. Why do I need to go through all of that? Wouldn't that new law pertain to me?

Again, I am no accountant and maybe I could be reading this all wrong but this is very confusing.

sara

Hi Girlindebt,

Under the IRS rules, only a primary residence can qualify for Mortgage Debt Forgiveness Debt Relief. As per the IRS rules, a primary residence is one in which the owner should have 2 years of ownership and occupation or 730 days. But this need not be concurrent. There can be short vacations but that will be considered as period of use. However, 1 year of stay out of the home won't be counted as period of use or occupation.

Since you've not stayed there for complete 2 years, probably that's the reason the IRS suggested that you'll have to pay taxes. Besides, there are other conditions under which one can get tax relief on canceled debt. These are:

The debt should have been canceled by the lender in 2007, 2008 and 2009.

The debt should have been taken to buy, build or improve a principal residence. Second homes, rental property or vacations homes are not applicable here.

The tax relief is limited to debt amount of $2 million.

The forgiven debt related to cash-out refinance or home equity loan is divided between the amounts required for buying, building, improving home and amounts used for purposes like tuition, payments of other debts, etc. The allowable portion for tax break is then calculated.

So, yes, there are loopholes which are evident from the conditions stated above.

Take Care

wealthbuilder2 · Posted: Sun Mar 02, 2008 11:13 am Post subject: Linda...

Unfortunately, a 1099M is like a W-2, it is a report of income for which you owe income taxes.

The IRS considers money that you were obligated to pay and did not, the sale was short of the total that was owed, as income and they demand that you pay taxes on the amount that was short paid in cash with your next tax return.

Now, the Mortgage Relief Act of 2007 relieves certain people of this absurd burden. Depending when your sale occurred; it only applies to the years 2007-2009, and if it was your primary residence in which you lived in at least 2 out of the last 5 years, you may be exempted.

I say maybe because if you did a cash out refinance, the money that you did not use to improve the house, that you spend on wine, men and song, would still count against you.

If the house was not your primary residence, you get no relief. Your only out would have been to have declared bankruptcy prior to the sale.

Hope this helps.

Bill

Guest

Bill, you mean one has to file bankruptcy chapter 13 prior to the sale so that he need not pay tax on the canceled debt, provided he's does not qualify for mortgage debt forgiveness.

wealthbuilder2

MAC_7

Correct!

Guest

WE HAVE RECD A 1099A FOR INVESTMENT PROPERTY IN WHICH OUTSTANDING BALANCE WAS FOR $436975.50 AND FMV IS $238,500. THE ORG LOAN AMOUNT IS FOR $370,000. WE SHOULD BE INSLOVENT DO TO LOST OF INCOME AND JOB FROM THE HOUSEHOLD. I ALWAYS HAVE STARTED THE PROCESS FOR BANKRCY BACK IN DEC 2008. I WANTED TO KNOW HOW WILL THIS CHANGE OUR TAXABLE INCOME? IF WE WIL HAVE TO PAY TAXES ON ANY OF THE AMOUNTS WHO MUCH WILL IT COULD BALLPARK FIGURE?

Posted: Sat Feb 14, 2009 2:35 am Post subject:

It will depend upon the type of bankruptcy you file. A bankruptcy attorney will be the best person to help you regarding this issue.

Guest

I lost my home to forclosure in 2008 and recieved a 1099-A form. The value of the hoem is less that what it shows I sold it for. Will I be taxed on this? Also being in MA will I be taxed by the state?

Posted: Wed Mar 11, 2009 10:03 pm Post subject:

Yes, you may have to pay capital gains tax for the sale of the property.

Guest

I went into foreclosure in 08, filed chapter 7 in 08, discharged in 09 - house still sits empty...should I expedite and do dil...or let it run its course? home was in bk...but worried I may still be financially responsible..taxes...and HOA...I abandon the home before discharge.
please give me some direction...my bk attorney is not helpful

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