Posted on: 27th Jan, 2010 07:52 pm
my husband and were received a bankruptcy discharge September 2008, which included a home loan. They foreclosed on us the following year, per our attorney this is "normal" becuase even though we had no mortgage any longer due to the bankruptcy, they still need to foreclose to take the property back. It was foreclosed on September 2009 and now, Jan 2010 we have received a 1099-A form stating that the balence was 84,516 and the FMV was 50,000 and box #5 states "yes" we are are liable for the repayment of the debt. What does this mean? is this an error? I thought the bankruptcy cleared it all away. How does this affect how I need to do my taxes this year? HELP!!!
Hi Jennifer,
If the fair market value (FMV) listed on the Form 1099A was more than the principal balance your dad owed on the mortgage, he does not have report any income due to discharge of indebtedness.
However, he will have to report the foreclosure as a sale for tax purposes and calculate the capital gains. His capital gains = Fair market value - the adjusted basis in the property (purchase price + major improvements). He will have to report this gain as his income. But in case he had used the property as his principal residence for at least 2 years out of the 5 years ending on the date of the foreclosure, he can exclude $250,000 from income.
For more information, you can refer to the following page:
http://www.irs.gov/newsroom/article/0,,id=174034,00.html
Thanks,
Jerry
If the fair market value (FMV) listed on the Form 1099A was more than the principal balance your dad owed on the mortgage, he does not have report any income due to discharge of indebtedness.
However, he will have to report the foreclosure as a sale for tax purposes and calculate the capital gains. His capital gains = Fair market value - the adjusted basis in the property (purchase price + major improvements). He will have to report this gain as his income. But in case he had used the property as his principal residence for at least 2 years out of the 5 years ending on the date of the foreclosure, he can exclude $250,000 from income.
For more information, you can refer to the following page:
http://www.irs.gov/newsroom/article/0,,id=174034,00.html
Thanks,
Jerry
In July 2009 I lost a rental propery to foreclosure in Arizona(they don't have deficiency judgements there)..I received a 1099A from the lender...balance owing less that FMV..at a total loss in reporting to IRS..to owe or not to owe..that is the question!!
Hi Brink,
The fair market value (FMV) listed on Form 1099A is more than the remaining balance on the mortgage. Hence, you do not have any income from discharge of indebtedness and you do not owe tax to the IRS on the mortgage balance. But you will have to calculate your capital gains from the sale of the home and report it on your taxes.
The fair market value (FMV) listed on Form 1099A is more than the remaining balance on the mortgage. Hence, you do not have any income from discharge of indebtedness and you do not owe tax to the IRS on the mortgage balance. But you will have to calculate your capital gains from the sale of the home and report it on your taxes.
Hi, Trying to help my mom with her taxes. She lost everything in the stock crash and was not able to pay her mortgage. The bank did offer a deed in lieu and took over her home and title. She has now received a 1099A for Box: 2 145,496 and Box: 4 140,000, Box: 5 is checked Yes.
Will my mom owe taxes on the difference between box 2 and 4? And is that amount the actual amount she will owe? Can she file a form 982? Thank you!
Will my mom owe taxes on the difference between box 2 and 4? And is that amount the actual amount she will owe? Can she file a form 982? Thank you!
Hi Help,
The box number 4 shows the fair market value of the property and the box number 2 lists the outstanding principal balance on the mortgage. In this case, the fair market value is less than the outstanding balance on the loan and your mom has a taxable income from the discharge of indebtedness. Thus, your mom will have to report this income to the IRS. However, if she used the property as her primary residence, she can claim exemption from paying taxes on the discharged debt amount by filing a Form 982 along with her tax return.
Thanks,
Jerry
The box number 4 shows the fair market value of the property and the box number 2 lists the outstanding principal balance on the mortgage. In this case, the fair market value is less than the outstanding balance on the loan and your mom has a taxable income from the discharge of indebtedness. Thus, your mom will have to report this income to the IRS. However, if she used the property as her primary residence, she can claim exemption from paying taxes on the discharged debt amount by filing a Form 982 along with her tax return.
Thanks,
Jerry
Hello I had an investment property. Filed BK 2008 I received a 1099 a from the bank for 2009. I believe I don't have to pay taxes on this. The 1099 says Yes on box 5. I don't understand. Can you help? I want to do my taxes on line Tax Act online.
To rogerdana,
You do not owe any taxes on the canceled debt amount if the debt was discharged through Chapter 7 of the Title 11 of the United States Bankruptcy Code. IRS clearly states that you do not have to pay any tax on the canceled debt amount if
1. You used the property as primary residence.
2. The debt was discharged through bankruptcy.
3. You were insolvent.
4. The debt was a certain type of farm debt that qualifies for exemption.
To get more information on how you can claim exemption from paying taxes on the debts discharged through bankruptcy, you can refer to the following page:
http://www.irs.gov/publications/p4681/ch01.html#en_US_publink100080240
You do not owe any taxes on the canceled debt amount if the debt was discharged through Chapter 7 of the Title 11 of the United States Bankruptcy Code. IRS clearly states that you do not have to pay any tax on the canceled debt amount if
1. You used the property as primary residence.
2. The debt was discharged through bankruptcy.
3. You were insolvent.
4. The debt was a certain type of farm debt that qualifies for exemption.
To get more information on how you can claim exemption from paying taxes on the debts discharged through bankruptcy, you can refer to the following page:
http://www.irs.gov/publications/p4681/ch01.html#en_US_publink100080240
our house went into foreclosure,and we filed bankruptcy.On our credit report it shows $50,000 dollars still owed.Are we still responsible for that amount?
Hi Gracie,
Was the debt discharged through bankruptcy? If it was, then you are no longer personally liable to repay the mortgage. You can send a letter to the credit bureaus along with the proof of your bankruptcy discharge and request them to remove the inaccurate information from your credit report.
Have you been sent any 1099 Form by the lender? If you have received one, you need to report it to the IRS. But you do not have to pay any tax as debts discharged through bankruptcy can be excluded from your income on the tax return.
Was the debt discharged through bankruptcy? If it was, then you are no longer personally liable to repay the mortgage. You can send a letter to the credit bureaus along with the proof of your bankruptcy discharge and request them to remove the inaccurate information from your credit report.
Have you been sent any 1099 Form by the lender? If you have received one, you need to report it to the IRS. But you do not have to pay any tax as debts discharged through bankruptcy can be excluded from your income on the tax return.
Hi, I'm about to file bktcy and I'm planning to discharge my 3 houses under water since I'm not interested in keeping any of them, and I'm planning doing a short sale on 1 of them after filing Bktcy, I think I will not have a debt cancellation as income tax liability from the lender on the short sale since I'll be wiping out all of my debts at Bktcy, even if I receive a 1099 from the lender after filing, is this true? Thank you.
Hi,
If your property is sold off at a short sale auction after bankruptcy, the lender will not be able to come after you for the balance dues. But he can issue a 1099c form. However, depending upon the Mortgage Debt Relief Act, you might not be responsible for paying the taxes.
Thanks
If your property is sold off at a short sale auction after bankruptcy, the lender will not be able to come after you for the balance dues. But he can issue a 1099c form. However, depending upon the Mortgage Debt Relief Act, you might not be responsible for paying the taxes.
Thanks
MY COMPANY FILED BANKRUPCY. WE RECIEVED A FORM 1099A. DO WE HAVE TO REPORT IT ON OUR TAXES. BOX 2 SHOWS $59,433.80 AND BOX 4 SHOWS $24,550.00. BOX 5 HAS A CHECK MARK IN THE NO BOX.
Hi LOIS,
You were not personally liable for paying the balance amount. In that case, you'll have to mention it in your tax returns. It will be better if you could contact a tax adviser and take his opinion in this matter.
Thanks
You were not personally liable for paying the balance amount. In that case, you'll have to mention it in your tax returns. It will be better if you could contact a tax adviser and take his opinion in this matter.
Thanks
Hi, We have a house in NM that we lived in for 13 mos. we rented it for about a year. We put it in a bankruptcy and had it discharged. The bank now wants us to short sale. We orginally bought the house for 400k and now will short sale it for 325k. The bank will forgive the debt. If we get a 1099 that shows a difference of 75k do we have to pay taxes on that and about how much. We currently make about 40k a year.
Hi Gabrielle!
Welcome to forums!
The bank will not be able to come after you for the deficient balance resulting from the short sale. This is because, your mortgage has been discharged in your bankruptcy filing. However, the forgiven debt will be considered as your income and you may be liable for paying taxes. You should contact a tax adviser and take his opinion in this matter.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
The bank will not be able to come after you for the deficient balance resulting from the short sale. This is because, your mortgage has been discharged in your bankruptcy filing. However, the forgiven debt will be considered as your income and you may be liable for paying taxes. You should contact a tax adviser and take his opinion in this matter.
Feel free to ask if you've further queries.
Sussane