MAMalody Posted October 1, 2011 Report Share Posted October 1, 2011 I don't normally handle abandonment issues so I would like some help, if you don't mind. I have two clients with receipt of a 1099-A. Client #1. This is a personal residence. As I understand it, I basically complete Form 982, line 1e and 2 for the forgiven amount and that is essentially it. He has not received a Form 1099-C. Because it is a personal residence the cancellation would not be taxable. Client #2. This is a house he purchased, razed, then built. He hoped to sell/rent it out. No depreciation taken. As far as I know never held out for rent. I can't tell for sure if this would be handled in a similiar fashion as #1. Would this be 1d property on the 982? Since he has not received a 1099-C, does this get reported? I have read Pub 4681 but am not up to speed on this. Any suggestions out there. Quote Link to comment Share on other sites More sharing options...
Pacun Posted October 1, 2011 Report Share Posted October 1, 2011 I don't normally handle abandonment issues so I would like some help, if you don't mind. I have two clients with receipt of a 1099-A. Client #1. This is a personal residence. As I understand it, I basically complete Form 982, line 1e and 2 for the forgiven amount and that is essentially it. He has not received a Form 1099-C. Because it is a personal residence the cancellation would not be taxable. Client #2. This is a house he purchased, razed, then built. He hoped to sell/rent it out. No depreciation taken. As far as I know never held out for rent. I can't tell for sure if this would be handled in a similiar fashion as #1. Would this be 1d property on the 982? Since he has not received a 1099-C, does this get reported? I have read Pub 4681 but am not up to speed on this. Any suggestions out there. Property 1, report the sale on schedule D and report the loss as personal loss. When 1099-C comes, then you file 982. Property 2. Gets reported on Schedule D and it seems to be in the same category as number 1 since your client never held it as investment and it was never in the martket for rent. Quote Link to comment Share on other sites More sharing options...
jainen Posted October 1, 2011 Report Share Posted October 1, 2011 >>He hoped to sell/rent it out.<< That seems unlikely to me. I find it hard to believe that anyone anywhere in the country anytime in the last five years had a genuine business purpose in tearing down a house and rebuilding it as rental property. The profit potential is completely absent. He might have had a misinformed intent to resell, but did he ever actually list it for sale (other than facing foreclosure)? Can he show that he paid a higher interest rate because he told the lender he would not occupy it as his own home? Quote Link to comment Share on other sites More sharing options...
MAMalody Posted October 1, 2011 Author Report Share Posted October 1, 2011 Pacun, thanks. Just got some more docs and Client #1 does have a 1099-C. Just use the 982 then and skip the Schedule D? Jainen, you may be correct. He has been working on this for a couple of years. It may have been a DIY project and he simply did not know what was going on, or he discovered what you said...no proft center there. Quote Link to comment Share on other sites More sharing options...
Pacun Posted October 2, 2011 Report Share Posted October 2, 2011 Client 1 has to deal with two forms 1099-A and C. Schedule D deals with A and 982 deals with C. You need to file both in this case. Remember that the loss is personal so you don't get 3K losses each year. Quote Link to comment Share on other sites More sharing options...
Pacun Posted October 3, 2011 Report Share Posted October 3, 2011 This is good information and you should read it (I have posted on another thread). There is a time limit and it has to to with an "identifiable event". In tax court the IRS has lost because the banks issued the 1099-C too late. go to www.ustaxcourt.gov and click on "opinion search" and type 1099-c on "text search". Then click on the last name and look for the hyperlink to the decisions. T.C. Memo. 2011-233 UNITED STATES TAX COURT THOMAS AND MONICA L. KLEBER, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 1545-09. Filed September 28, 2011. and please read this other case. T.C. Summary Opinion 2009-180 UNITED STATES TAX COURT THOMAS JOSEPH LINKUGEL, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 28895-08S. Filed December 1, 2009. Quote Link to comment Share on other sites More sharing options...
MAMalody Posted October 3, 2011 Author Report Share Posted October 3, 2011 Thanks for the info and link. I appreciate it. Quote Link to comment Share on other sites More sharing options...
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