miatax Posted February 26, 2009 Report Share Posted February 26, 2009 Hi: I received from a client a 1099a and 1099c for a foreclosed property with the following information: 1099C box 2 = $49,722 (Amt of debt canceled) 1099C box 7 = $84,000 (FMV) 1099A box 2 = $111,921 (Balance of principal o/s) 1099A box 4 = $84,000 (FMV) 1099A box 5 checked YES (personally liable) 2 Questions: It's too late and I don't think I'm thinking straight, but why would the amount of debt canceled not be equal to the balance of principal o/s less the fmv of the property? ..if this amount is less, why wouldn't the 1099c reflect this amount? Also, on form 982, since I have box 1e checked, atx won't let me create the E-File unless I fill in box 10b. What figure do I put here if IRS states that if person did not keep the property after abandonement, this is not applicable? Thanks! Quote Link to comment Share on other sites More sharing options...
LindaB Posted February 26, 2009 Report Share Posted February 26, 2009 "Also, on form 982, since I have box 1e checked, atx won't let me create the E-File unless I fill in box 10b. What figure do I put here if IRS states that if person did not keep the property after abandonement, this is not applicable?" There was a form update for from 982 yesterday that may have caused this. You're right, if they don't still have the property then they can't reduce the basis in it. I think this is something that ATX will have to fix. The client shouldn't have gotten a 1099-A and a 1099-C on the same loan. Is one for a primary mortgage and one for a home equity loan? Quote Link to comment Share on other sites More sharing options...
LindaB Posted February 26, 2009 Report Share Posted February 26, 2009 Hi: I received from a client a 1099a and 1099c for a foreclosed property with the following information: 1099C box 2 = $49,722 (Amt of debt canceled) 1099C box 7 = $84,000 (FMV) 1099A box 2 = $111,921 (Balance of principal o/s) 1099A box 4 = $84,000 (FMV) 1099A box 5 checked YES (personally liable) Thanks! If these two are for the same property, this doesn't seem right. The 1099-A is showing the transfer of the property, would be reported as a sale, and does not show any COD income. The 1099-C should be showing COD income, but it would be the amount by which the debt canceled is greater than FMV, so it's not showing any COD since box 2 is less than box 7. I don't know for sure, but it appears that there were two loans secured by the same property, and by reporting it this way they have used the same basis twice. Are the dates on the 1099-A and 1099-C about the same? Quote Link to comment Share on other sites More sharing options...
Tax Prep by Deb Posted February 26, 2009 Report Share Posted February 26, 2009 My guess is that the property had a first and a second. The first is on the 1099A the second is on the 1099C Just a guess! Deb! Quote Link to comment Share on other sites More sharing options...
miatax Posted February 27, 2009 Author Report Share Posted February 27, 2009 Both dates on the 1099a (date of lender's acquisition or knowledge of abandonement) and 1099c (date canceled) are 10/02/08. Based on your responses, now I'm actually more confused....how should I report then? Quote Link to comment Share on other sites More sharing options...
LindaB Posted February 27, 2009 Report Share Posted February 27, 2009 The reason I asked about the dates was to see if the 1099-A was earlier in the year (lender took over property) and the 1099-C was later (lender disposed of property). If that were the case (different dates) then it wouldn't have been reported correctly. With the same dates, I think there must be a primary mortgage (1099-A) and secondary mortgage or home equity loan (1099-C). If this is true, I still think the 1099s are not correct. The 1099-A is showing that the $84,000 FMV of the property is being used to satisfy part of the debt on the loan with a balance of $111,921. If there is another loan with a balance of $49,722, then the same $84,000 cannot be used to satisfy that debt. With the way these 1099s are prepared, you would use the 1099-A to show the sale of the property, using $111,921 as the sales price. The 1099-C is not showing any COD income because it shows that the FMV of the property is more than the debt, so you wouldn't have to do anything with it. But this is where I think it is not correct, because they have already used the $84,000 FMV to satisfy part of the other debt. Sorry if I'm not explaining this well. Were there two loans on the same property? The way the lender prepared the 1099s it looks like there are two properties, each with a FMV of $84,000. Quote Link to comment Share on other sites More sharing options...
LindaB Posted February 27, 2009 Report Share Posted February 27, 2009 If it's true that there is just one property with a FMV of $84,000, with a first mortgage of $111,921 and a second mortgage of $49,722, then I think the 1099-C should not have shown the FMV of $84,000. Then the $49,722 would be COD income that you might be able to exclude on form 982. If this second loan was not used to buy, build or improve the property, you can't use the exclusion for principal residence (form 982 line 1e). You would need to try for insolvency. (At least then you wouldn't run into the problem of the program wanting you to reduce the basis of a property he no longer has.) Find out from the client if there was one property with two loans, and if the smaller loan was used to buy, build or improve the property, or used for something else. Quote Link to comment Share on other sites More sharing options...
miatax Posted February 27, 2009 Author Report Share Posted February 27, 2009 Thank you to everyone. It's the same property so I'm filling out the info on the 982. I just hope I can efile with no basis on 10b. Quote Link to comment Share on other sites More sharing options...
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