Upon receiving a 1099A I have to report this to the IRS. Do I first fill out the sale of home with that 1099A information and then carry the result to Schedule D?

First - please verify that you have to report this at all. For most people the form 1099-A is for imformatoin purposes only - if taxes were due because of cancellation of debt then the bank would send you a 1099-C, not 1099-A. So the first question to you is: does the amount reported in box 4 of the 1099-A (Fair market value of property) exceed the amount in box 2 (Amount of principal outsanding)? If yes, then this is not reportable on your taxes UNLESS the box 2 amount exceeds your adjusted cost basis in the property - in which case you have a gain. IF you have a gain, then please respond back, and let us know if this property was your principal residence for at last two of the previous 5 years. We'll continue with the details of how to report this after you respond.

If Box 4 is less than box 2 then you have cancellaton of debt, and you may owe taxes if you don't qualify for an exclusion under the Mortgage Foregiveness debt Relief Act, or if you didn't declare bankruptcy. Again, please post back and we'll work through the details with you.

Thanks. I believe you are correct at this point. I don't know if I should also expect a 1099C, but I would have thought the two forms would arrive together. Maybe not. My client also filed chapter 7 bankruptcy but the only bankruptcy references I see are for Chapter 11.

Generally, the client gets ONLY the 1099-C if the house's FMV does not exceed the loan balance.

If the Form 1099-A is the only item received and FMV exceeds the loan value, there will be NO imputed income and NO requirement to claim such on the tax return.

I really appreciate the help. I also spoke with two EAs who pretty much agree with your assessment. I am sure I handled the situation well after reading these responses.

I received 1099-A and Box 2(Principal Outstanding) is $400,500 and Box 4 FMV is $400,000. Box 5 is also checked that I'm personally liable for repayment of debt. I filed for Bankruptcy Chapter 7 and the home and deficiency was included in the bankruptcy. This home was purchased as principal residence and owner occupied for 2.5 yrs before foreclosure. Never received 1099-C. Do I have to file Schedule D with this 1099-A or no?

First, please do not taga new question onto an old thread like this - it's better to post a new question as a new topic.

No need to report on schedule D. Although it's possible that you may have a capital gain (if your cost basis is less than $400,500), since this was your principal residence for at least 2 of the last 5 years it automatically qualifies for the exemption from capital gains. If your basis was more than $400,500, you have a loss, which is not deductible (because a house is considered to be personal property). So you do not report the sale of the house. Also, FYI - because you filed bankruptcy the debt forgiveness amount of $500 is not taxable, so you do not report the $500 as income on your taxes.

Thank you for response. I bought house for $387,500 and spent about $30,000 upgrading it. Cost basis is less than FMV of $400,000 and Outstanding balance of $400,500. Do I have a Capital gain and should I file Schedule D and show exemption or do not file anything because of bankruptcy?

Thank you.




First, please do not taga new question onto an old thread like this - it's better to post a new question as a new topic.

No need to report on schedule D. Although it's possible that you may have a capital gain (if your cost basis is less than $400,500), since this was your principal residence for at least 2 of the last 5 years it automatically qualifies for the exemption from capital gains. If your basis was more than $400,500, you have a loss, which is not deductible (because a house is considered to be personal property). So you do not report the sale of the house. Also, FYI - because you filed bankruptcy the debt forgiveness amount of $500 is not taxable, so you do not report the $500 as income on your taxes.

First, you don't have a gain as your cost basis is $387,500 plus the $30K in capital improvements = $417,500. So you have a loss, don't report the sale on your taxes. Second, even if you had a gain you qualify for the exemption, and in that case you don't need to report the sale either. Either way - you don't report anything on your taxes.