terry Posted March 17, 2008 Report Share Posted March 17, 2008 Hi everyone! Search resulted in conflicting ways to proceed so here goes.... T/P recieved just 1099-A so far. Box 2. Bal. of principal outstanding is 180000. Box 4. FMV is 190000. Box 5. yes,liable for repayment. Adjusted basis is 170000. Sec. 121 exclusion will apply. Am I to use Balance of principal as Sales Price on Sch. D or FMV? Thanks in advance to all who respond. Quote Link to comment Share on other sites More sharing options...
LindaB Posted March 18, 2008 Report Share Posted March 18, 2008 Hi everyone! Search resulted in conflicting ways to proceed so here goes.... T/P recieved just 1099-A so far. Box 2. Bal. of principal outstanding is 180000. Box 4. FMV is 190000. Box 5. yes,liable for repayment. Adjusted basis is 170000. Sec. 121 exclusion will apply. Am I to use Balance of principal as Sales Price on Sch. D or FMV? Thanks in advance to all who respond. According to a worksheet in pub. 544, you would use the smaller of the amount of debt canceled or the FMV, for the sales price. I would use the $180k for the sales price and $170k adj. basis and exclude the $10k gain. Quote Link to comment Share on other sites More sharing options...
terry Posted March 19, 2008 Author Report Share Posted March 19, 2008 According to a worksheet in pub. 544, you would use the smaller of the amount of debt canceled or the FMV, for the sales price. I would use the $180k for the sales price and $170k adj. basis and exclude the $10k gain. Thank-you Linda. Quote Link to comment Share on other sites More sharing options...
jainen Posted March 19, 2008 Report Share Posted March 19, 2008 >>use Balance of principal as Sales Price on Sch. D or FMV?<< Why use either? The instructions for Schedule D say not to report a Section 121 exclusion unless there is additional non-excluded gain. By the way, doesn't the mortgage company now owe your client $10,000, since the house sold for more than the loan amount? Quote Link to comment Share on other sites More sharing options...
Pacun Posted March 19, 2008 Report Share Posted March 19, 2008 >>use Balance of principal as Sales Price on Sch. D or FMV?<< Why use either? The instructions for Schedule D say not to report a Section 121 exclusion unless there is additional non-excluded gain. By the way, doesn't the mortgage company now owe your client $10,000, since the house sold for more than the loan amount? Interesting point Jainen. By the time the bank is finished with this guy, this guy will owe the bank more than 10K. Bank charged about 4K to my friend because he was late with payments and the bank sent him a foreclosure notice. If lawyers had repossed the house, I believe my friend would have owed more than $10K on attorney fees. Also, I think the bank will sell his property for less than the FMV and I believe there is a clause on loan application to cover the bank's position. So the 1099-A is a document just to show the ex-owner that he doesn't have any rights on the property anymore. Quote Link to comment Share on other sites More sharing options...
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