[jimmy yue]

I understand that Box 4 is FMV and Box 2 is the balance of principal outstanding, what happens if the FMV is bigger than the out standing balance that means I have a gain and I have to pay tax on this gain?

If this is true, when is the gain coming from, the lender hasn't sold the property yet and even they have sold my property, this is their gain or loss, there is nothing to do with me right?

Somebody told me this is just a kind of notice telling you what is going on that is all you just simply ignor it but I was told also that the outstanding balance is your gain and this is your profit and you need to pay tax. I am totally confused, please explain and tell me what to do with this 1099 a form. Do I forget it or I need to do something about it?

Waiting for your kins help.


Jimmy

[ebaines]

The 1099-A form is for information purposes only, and in your case you do not need to include it in your tax return. You have effectively sold the house to the bank for the outstanding loan amount. Since the FMV was greater than the outstanding loan amount, the bank got more in value (the house) than the loan that they forgave. Hence you have no income to report from this, UNLESS the cost basis of your house is less than the amount of the loan principal - in which case you have a capital gain.

It doesn't matter whether the bank has sold the house to a 3rd party or not - you have effectively sold it to the bank, and hence your gain (or loss) is simply dependent on the amount of loan that was forgiven and your original cost basis.

IF the FMV had been less than the loan amount, then you would have a tax ssue, as the differnce would be considered income. But in that case the bank would have sent you a 1099-C form, not a 1099-A.

[solara]

A similar question: If you receive a 1099-A and the FMV is less than the loan amount, then a 1099-C should be issued as well. I have read that banks may sometimes issue the 1099-C a year, or several years later after the 1099-A (depending on when they sell the home?).

If a foreclosure is complete and they (Chase) reportedly sold the property at the reported FMV listed on the 1099-A to another banking institution (Fannie Mae), and Fannie Mae later sells the property for a lower price, will that new sale price be the FMV listed on the 1099-C? I would think if Chase sold it to Fannie Mae, then that should be the actual FMV used to calculate the debt cancellation for the 1099-C. If Fannie Mae sells it later at a lower price, that should not be the price used for debt cancellation right?