David1980 Posted March 12, 2014 Report Share Posted March 12, 2014 We cannot dispute, appeal or control the process the banks or lending institutions use to determine the amount of write off. That is all internal policy within each institution. That's a bit like saying we can't dispute, appeal or control the employers process in determining the amount of wages to report on a W-2. If a W-2 is incorrect I'll continue to dispute that W-2. I'll continue to rely upon IRS guidance in IRS Publication 4681 in determining the amount of ordinary income and gain/loss. I agree to disagree. 1 Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted March 12, 2014 Report Share Posted March 12, 2014 I disagree, but I seem to be outvoted. The amount the bank WRITES OFF THEIR BOOKS is the amount on 1099C. If I owe the bank $200,000 on a rental property. The bank repossesses it. The bank sells it for $1,000, the 1099C will show $199,000 DESPITE the FMV. Show me any rules to dispute my position. But in this case Jack, they did not sell it for 1K, they sold it for 2000K, so someone clearly just made a mistake in filling out out the 1099C. It happens. 1 Quote Link to comment Share on other sites More sharing options...
Janitor Bob Posted March 12, 2014 Report Share Posted March 12, 2014 I would think that to the lender, the value of the repossesed rental has nothing to do with the FMV (they are not in the business of owning property)....the value to the lender lies in what they sell it for....which was probably less than FMV.....So the lender did lose something...they loaned $200k to the borrower and in return received a home that they probably could only sell for less than $200k. In the lender's eyes, they DID lose $200k.....because they do not know when (or even if) they can sell the house...or if they do, how much they will get. I'm not talking regs here...just thinking it through logically from the lender's POV. Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted March 12, 2014 Report Share Posted March 12, 2014 But in this case Jack, they did not sell it for 1K, they sold it for 2000K, so someone clearly just made a mistake in filling out out the 1099C. It happens. Where does it say how much the property was sold for? Is that a new box on the 1099C or are we still speculating? Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted March 12, 2014 Report Share Posted March 12, 2014 I thought Rita said it sold for 200K? Quote Link to comment Share on other sites More sharing options...
Catherine Posted March 12, 2014 Report Share Posted March 12, 2014 Lenders are NOT supposed to issue that 1099-C unless and until they have disposed of the property, and have decided that further waiting to collect on any balance owed is not in there interests. Only then can they know exactly how much debt they have forgiven, and so issue the 1099-C. One of the recurring issues with those 1099-C's is specifically that banks refrain, oftentimes for *years*, from issuing them as they have not made a final disposition of the property and/or have not made a final decision not to pursue repayment options. One can certainly look up (on Zillow, in public county records, in online town records) the price at which a foreclosed house sold. These are all public records. If the house hasn't been sold, there is no basis on which to issue that 1099-C. If it has, then if it sold for the outstanding balance owed to the foreclosing bank -- or more! -- there is also no cause to issue a 1099-C, ever (we set aside here the case of multiple loan issuers on one property). It is only when a property is sold for LESS than the loan balance that there is any call for a 1099-C. And that 1099-C is supposed to be for the difference between the outstanding loan balance and what the property was sold for. Certainly it bears scrutiny that there might have been additional loans on this property. But on the surface, it sure looks like the bank (1) jumped the gun in issuing that 1099-C, or (2) issued it for an incorrect amount. Plenty of folks working in banks who don't understand these intricacies; could have been as simple as a worker misunderstanding an instruction, or covering for someone else and unwittingly working past their level of competence. 5 Quote Link to comment Share on other sites More sharing options...
Janitor Bob Posted March 12, 2014 Report Share Posted March 12, 2014 Catherine...that explanation was brilliant. 2 Quote Link to comment Share on other sites More sharing options...
RitaB Posted March 12, 2014 Author Report Share Posted March 12, 2014 Well, I thought my post about why the hell would you put $400K income on a $200K transaction was pretty good, too, but I didn't get any love from you on that, JB. 2 Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted March 12, 2014 Report Share Posted March 12, 2014 Lenders are NOT supposed to issue that 1099-C unless and until they have disposed of the property, and have decided that further waiting to collect on any balance owed is not in there interests. Only then can they know exactly how much debt they have forgiven, and so issue the 1099-C. One of the recurring issues with those 1099-C's is specifically that banks refrain, oftentimes for *years*, from issuing them as they have not made a final disposition of the property and/or have not made a final decision not to pursue repayment options. One can certainly look up (on Zillow, in public county records, in online town records) the price at which a foreclosed house sold. These are all public records. If the house hasn't been sold, there is no basis on which to issue that 1099-C. If it has, then if it sold for the outstanding balance owed to the foreclosing bank -- or more! -- there is also no cause to issue a 1099-C, ever (we set aside here the case of multiple loan issuers on one property). It is only when a property is sold for LESS than the loan balance that there is any call for a 1099-C. And that 1099-C is supposed to be for the difference between the outstanding loan balance and what the property was sold for. Certainly it bears scrutiny that there might have been additional loans on this property. But on the surface, it sure looks like the bank (1) jumped the gun in issuing that 1099-C, or (2) issued it for an incorrect amount. Plenty of folks working in banks who don't understand these intricacies; could have been as simple as a worker misunderstanding an instruction, or covering for someone else and unwittingly working past their level of competence. Sorry to come in so late to the party, but I think Catherine is right on the money. I see it as two different possible explanations: 1. The bank did not sell the home, listed the FMV and issued the 1099 in error 2. The bank did sell the home for 200K and issued the 1099 in error. If this were my client, I would ask them to call the lender and get an explanation, and try to get them to correct the 1099 (yeah, I know, good luck with that and let me know how that works out for you). But it is part of the due dillegence process before you advise your client to take a position on a tax return. If the lender is not taking calls or is uncooperative, then a call to a congressman up for re-election might help. If it was my client and they could not get a clear explanation from the bank, I would show the home sold for 200K as per the 1099A, and include the 1099C on Line 21, and then zero it out on line 21 as well with an explanation "incorrect 1099 issued by bank". Document the position, wait for the letter, and explain it to the IRS in 2 years. It seems very strange to me that the dollar amounts were exactly round numbers? Is that you just making up numbers for illustrative purposes or was the exact FMV listed as $200,000.00? Just my take on this. Tom Hollister, CA 3 Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted March 12, 2014 Report Share Posted March 12, 2014 Well, I thought my post about why the hell would you put $400K income on a $200K transaction was pretty good, too, but I didn't get any love from you on that, JB. I think you are brilliant as well...scary as hell...but brilliant too. So glad the Mississippi river, Rocky mountains, and Sierra Nevada mountains are between us, cause if you were pissed at me, I might be able to get to Hawaii before you got to me in Hollister. Love ya girl. Scared too. Tom Hollister, CA 1 Quote Link to comment Share on other sites More sharing options...
RitaB Posted March 12, 2014 Author Report Share Posted March 12, 2014 I think you are brilliant as well...scary as hell...but brilliant too. So glad the Mississippi river, Rocky mountains, and Sierra Nevada mountains are between us, cause if you were pissed at me, I might be able to get to Hawaii before you got to me in Hollister. Love ya girl. Scared too. Tom Hollister, CA I love you more. And no, the numbers were not $200K, they were $218,866.37. Now I will have to kill you since you got that out of me, you sweet talker. 1 Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted March 12, 2014 Report Share Posted March 12, 2014 I love you more. And no, the numbers were not $200K, they were $218,866.37. Now I will have to kill you since you got that out of me, you sweet talker. I am getting in a canoe and paddling for the islands right now. Tom Hollister, CA 2 Quote Link to comment Share on other sites More sharing options...
RitaB Posted March 12, 2014 Author Report Share Posted March 12, 2014 I am getting in a canoe and paddling for the islands right now. Tom Hollister, CA I like swimming. Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted March 12, 2014 Report Share Posted March 12, 2014 Sharks are killers too, and they like to swim as well......hmmmmmm I'm not saying nothin'....I'm just saying. Tom Hollister, CA 1 Quote Link to comment Share on other sites More sharing options...
Janitor Bob Posted March 12, 2014 Report Share Posted March 12, 2014 Well, I thought my post about why the hell would you put $400K income on a $200K transaction was pretty good, too, but I didn't get any love from you on that, JB. RitaB...of course it was....as your posts always are....I'll give you love any day! ....I'm still sleeping in the doghouse tonight aren't I? 2 Quote Link to comment Share on other sites More sharing options...
RitaB Posted March 13, 2014 Author Report Share Posted March 13, 2014 I have run out of my allotted "likes" for the day, or I would "like" both Tom's and Bob's last posts to the power of 10,000 suns. We are all family here, I really would love to hand out "likes" much more liberally, but they are in short supply, I guess. Wait, here are some smileys: 1 Quote Link to comment Share on other sites More sharing options...
jklcpa Posted March 13, 2014 Report Share Posted March 13, 2014 Rita, I did too. Smiling back at ya. Quote Link to comment Share on other sites More sharing options...
Cathy Posted March 13, 2014 Report Share Posted March 13, 2014 Rita,Sorry to be chiming in so late but the link below will probably help answer your questions:http://www.irs.gov/pub/irs-pdf/i1099ac_13.pdf Quote Link to comment Share on other sites More sharing options...
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