Lucho Posted March 2, 2010 Report Share Posted March 2, 2010 Taxpayer did a short sale. The final HUD from the title company shows the amount due to seller (taxpayer). That same amount was used to pay off the taxpayer first mortgage loan. Another financial institution sent the taxpayer a 1099-C with an amount of cancelled debt in box 2. Taxpayer was responsible for this debt. Taxpayer bought the house in 2002 and short sale last year (he lived more than five years in the house; he did not used any of the cancel debt money for home improvements. Based on this excenario, this is the way I try to proceed with this return: Sch D. The HUD $ amount used to pay the first loan +(plus) the cancelled debt amount on box 2 of 1099-C equal total proceed from sale of home – (less) adjusted basis, what taxpayer paid for the house in 2002 = (equals) total gain from sale. Taxpayer is single and entitled to $250,000 gain exclusion. Am I right or lost? Any guidance will be appreciated. This is my first time working on a short sale. I have being sick for three weeks and no returns done during this time and now that I feel better I got this client. Thank, may God keep and blesses this forum. Lucho Quote Link to comment Share on other sites More sharing options...
Pacun Posted March 3, 2010 Report Share Posted March 3, 2010 They qualify for the exclusion and since it was their primary home, they don't have to pay taxes on the cancelled debt. Quote Link to comment Share on other sites More sharing options...
Lucho Posted March 3, 2010 Author Report Share Posted March 3, 2010 They qualify for the exclusion and since it was their primary home, they don't have to pay taxes on the cancelled debt. Thank you, PACUN. Lucho Quote Link to comment Share on other sites More sharing options...
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