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Selling Price of Abandoned Rental Property (4797)


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I had rental property foreclosed in 2015 and need help determining its selling price for the purposes of form 4797.

I received a 1099-A from FANNIE MAE showing $81,000 (I'm rounding the numbers) as the "balance of principal outstanding" (Box 2) and a FMV of $120,000 (Box 4).  The FMV is accurate, since this is what the property sold for later at auction, as also of course is the loan balance.  The 1099-A further indicates that the loan is recourse (Box 5).

I also received a 1099-C from Wells Fargo Bank, showing that a second mortgage for $60,000, which was also a recourse loan, had been cancelled in full.

The IRS rules for determing the selling price state that it is the lower amount of:

  • the outstanding loan balance immediately before the foreclosure minus any debt for which the borrower remains personally liable after the foreclosure; or
  • the fair market value of the property being foreclosed.

It would seem to me that the selling price could be zero.  It could be if I assume that somehow the second mortgage is regarded as a separate consumer loan, only the first mortgage counts for the purposes of form 4797, yet because I remain liable for the first mortgage, it is substracted in full, leaving the selling price at zero.  Or, the selling price could be $60,000, which is the amount of the total loan balance prior to foreclosure minus the $81,000 of it for which I remain liable.  Or, the selling price could be $81,000 if I assume that this is in effect the amount for which I sold the property to FANNIE MAE.  Or, I guess the selling price could be the $120,000 FMV, if for whatever reason I assume that both loans were cancelled in the foreclosure.

My leaning is to use the $81,000 number that FANNIE MAE put on the 1099-A it sent, less because I'm convinced that it is the correct number but more because whenever possible I like to use numbers that correspond to the numbers financial institutions report.  It also seems the common sense selling price to use.  However, I really don't know whether or not that is the correct number and don't want to use the wrong number and invite IRS hassles.  I can work the taxes fine with any of the numbers, just would prefer to work them using the number that the IRS wants me to use.

Anyone know what number I should use as the selling price?  Thanks!


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Ken, while this site is accessible to the public, it is privately owned and maintained for use by tax professionals only, most of whom use the ATX tax software packages.  We don't help the general public with tax questions here. I'd suggest you find a tax professional in your local area that will be able to address your issues and tax preparation needs.

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I was wondering about this, and it's your collective call not to answer my question if you choose, but here is my situation:

1. I am, or at least once was, a "tax professional," or was according to the exaggerated title applied to me the two years I worked for Block.  If anyone asks, I do occasionally prepare people's taxes for them as well as help them with other financial matters for a small fee.  True, I only have one client now and don't have a shingle out or an employer, but I'm not so sure that I don't qualify as a "tax professional" simply because my question concerns my own taxes.

2. I considered phrasing my question as if I were asking about a client's tax situation rather than my own, but chose to be honest.

3. I don't live in the US, don't even visit, but am rather one of those expats taxed based upon citizenship rather than residency (although the property is in the US).  I don't therefore have a "local area" where I can find and hire a "tax professional."  Oh, there are a few expats here who hang out shingles as "tax professionals," but I'm not sure how qualified they are, especially in real estate.  The bulk of their business seems to involve the foreign income exclusion, compliance with reporting on foreign assets, and the like.

4. I have a healthy suspicion of "tax professionals," having worked with some of them in the US who I couldn't trust to count change for a dollar accurately, and have a corresponding suspicion of the competence of IRS clerks.  Since so many of both answer tax questions incorrectly and my question seems to be a tricky one, I figured I'd be more likely to get the correct answer by posting on a discussion board of "tax professionals" where some probably know the answer to my question, and if one answers incorrectly others will probably correct the misinformation.  I don't feel comfortable trusting a "tax professional" I don't even know, even though I'm sure there are many who will take a fee from me for providing an answer online.

5.  I'm broke, at the moment trying to find a way to get the money together to pay a dentist to handle a toothache, and really can't pay a fee to get an answer to one question.

Your call,


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Judy had no intentiion of offering up any offense in her response. Since you have such an ugly opinion of "tax professionals" I fail to understand why you would want our advice. "Tax Professionals" are a wide range of individuals. A CPA, EA, Attorney, RTRP or one who participates in the annual filing season program can be a 'tax professional". This board is made up of those individuals and not what one would call the average run of the mill tax preparer. Since you may question a response from one of us because we are 'tax professionals", I thought I would just give you a link below from a public website that would appear to answer your question. It is your call as to whether you trust this opinion or not.


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