Posted on: 19th Feb, 2010 07:08 am
Jerry,
I just read your response to Liss' question. I have a similar situation, however, the property was a rental. The amount owed is less than the FMV. Do we have to file taxes on this, if so, how is it reported? I have been all over the internet to figure out how to file it but there isn't anything clear as to how. Can you help?
I just read your response to Liss' question. I have a similar situation, however, the property was a rental. The amount owed is less than the FMV. Do we have to file taxes on this, if so, how is it reported? I have been all over the internet to figure out how to file it but there isn't anything clear as to how. Can you help?
Hi Guest,
If you've been sent a 1099A form by your lender and the outstanding debt has been cancelled, you need to report it to the IRS. You can claim exemption from taxes under Mortgage Forgiveness Debt Relief Act if you used the property as primary residence. Since it was a rental property, the debt relief act will not apply in this situation. However, you've mentioned that the amount owed is less than the fair market value (FMV), right? Well, in that case, you do not have any income due to cancellation of debts and thus, you need not report it to the IRS.
If you've been sent a 1099A form by your lender and the outstanding debt has been cancelled, you need to report it to the IRS. You can claim exemption from taxes under Mortgage Forgiveness Debt Relief Act if you used the property as primary residence. Since it was a rental property, the debt relief act will not apply in this situation. However, you've mentioned that the amount owed is less than the fair market value (FMV), right? Well, in that case, you do not have any income due to cancellation of debts and thus, you need not report it to the IRS.